Meanwhile, Avanti announced its 30th consecutive quarter of record revenue, albeit with a whopping net loss of $217 million due to payment of $237 million in fines and restitution following the conclusion of the criminal case against the company and several of its co-founders. Avanti's second-quarter revenue of $98 million represented a modest 9 percent increase over the second quarter of 2000.

The Sequence suit claims that Star-RCXT violates a 1999 Sequence patent on extraction of parasitic impedance. It's not a new claim — when Avanti announced Star-RCXT in November 1999, Sequence publicly sent a letter to Avanti warning of a possible patent violation. But Sequence did not take legal action until this week.

"Until the Avanti-Cadence intellectual property case shook out, it was unclear what the climate was for this type of case," said Greg Fawcett, senior director of corporate marketing at Sequence. "Avanti is now in transition, and we wanted to make clear that one of its products infringes on a Sequence patent."

Mirroring the original Cadence Design Systems Inc. lawsuit filed more than five years ago, the SVR suit accuses Avanti and several of its current and former employees of unfair competition; receipt, concealing and sale of stolen goods; false advertising; conspiracy; and violations of federal racketeering laws. SVR claims that Avanti's theft of Cadence source code enabled Avanti to knock SVR out of the number-two position in IC placement and routing.

Based on comments during this week's Avanti analyst call, the company will take a strong stand against both lawsuits. "We examined the [Sequence] patent in the past," said Clayton Parker, Avanti head of corporate marketing. "We believed then, and believe now, that the [claim] has no merit, and we will contest it vigorously."

Asked about the SVR suit, Parker said, "to be charitable it's very novel. I'm pretty dubious about the merits of it. We intend to oppose it vigorously as well."

The Sequence lawsuit is seeking an injunction against Star-RCXT and unspecified damages. Fawcett said that Sequence has started licensing its intellectual property, and will consider licensing its patent to Avanti, should the two companies reach an agreement. SVR has declined to state how much money it is seeking.

Avanti, meanwhile, still faces a civil suit, for which Cadence may seek hundreds of millions of dollars in punitive damages. The company has already paid $140 million of the $195 court-ordered restitution to Cadence; it plans to pay $27 million by August 20, and is negotiating to delay the final payment until January 2002.

Garo Toomajanian, analyst at Dain Rauscher Wessels, expressed concern in the conference call about Avanti's cash levels running "dangerously low" following the payment of $27 million in August. But Viraj Patel, Avanti head of finance, said the company is consistently generating around $25 million in cash per quarter.

Paul Lo, Avanti president, noted that the company "continues to enjoy strong sales and revenues." Excluding litigation expenses, the company reported record diluted earnings per share of $0.52, a 20 percent increase over the previous year's quarter. But adding in the expenses caused a net loss of $5.41 per share.

"After recent events, there has been a rumor that Avanti may be losing customers," Lo said. "I can state without qualification that we don't know of a single Avanti customer who has defected."

But that doesn't mean customers aren't worried. "We're spending a lot of time with major customers, and they obviously have a lot of concerns," said Parker. "We're doing a number of things to address those concerns. We're going to work case-by-case to make sure they remain our customers."