Cooley noted the absence of chief executives from the three largest EDA vendors — Mentor Graphics, Cadence Design Systems and Synopsys. He said Mentor and Cadence had refused to participate in a panel that included Erach Desai, analyst from American Technology Research. Synopsys wouldn't participate if its two largest competitors weren't there, he said.

Desai's brief presentation showed why some EDA vendors aren't fond of the often-controversial analyst. Despite some positive comments, such as the high margins available in the software business, Desai said that the EDA industry has basically not been growing since 2001.

Desai accused EDA vendors of overselling, of "cutthroat and immature pricing wars," and of causing confusion with changes in licensing models. "It's the hardest sector to understand, and then they all sue each other," Desai said.

Desai also spoke of the "chronic need for consolidation," which prompted some disagreement among panelists. "EDA historically brings fragmentation and consolidation at the same time," said Lucio Lanza, president of Lanza TechVentures. "It's not going to change. Innovation comes from fragmentation."

But Rajeev Madhavan, chief executive of Magma Design Automation, said the approximately 20 companies in assertion-based verification is far too many. "Nobody is going to do very well," he said. "A lot of them need to get together."

A discussion of venture capital availability was prompted by an attendee who complained that he couldn't get funding for his idea. "There's a lot more VC money coming into EDA now than two years ago," said David Evans, chairman of Forte Design Systems. Smaller and newer VC companies, he said, are especially going into EDA.

Madhavan agreed that things have changed, but not necessarily for the better. When he was starting Ambit, he noted, 31 VCs - including Lanza - turned him down. But in 2002, Madhavan said, a lot of money went into EDA from "VCs who have no clue as to what EDA is about."

Cooley asked how small companies can compete against the "all you can eat" pricing practices of the big three EDA vendors, where deals are so large that some tools are effectively thrown in for free.

"The 'all you can eat' business model makes it very difficult to build large companies. Long term we will all suffer from it," said Lanza.

"As deals get bigger, they are negotiated at a higher level by people who probably have no clue as to what they're buying," said Jacques Benkoski, CEO of Monterey Design Systems. "They're buying a good deal, but not necessarily something engineers can use."

Benkoski added, however, that Monterey has found it easy to "come in behind their big deals" and get revenue for Monterey products. Madhavan said that "competing against dinosaurs" has not been a problem for Magma, because of the value the company is providing.

Asked about the next "killer app" in EDA, Lanza had a quick response. "If I had to pick only one area to invest in today, it would be the time between when people think a design is finished and when it is really finished. Design for manufacturing is a huge area that will absorb a lot of money."

Moshe Gavreilov, Verisity's chief executive, said the lack of EDA growth must be viewed within the context of the "holocaust" that is affecting the electronics industry. "Given that it's in the third year of the most significant downturn ever in electronics, [EDA] is doing pretty well," he said.

Bernard Aronson, CEO of Synplicity, said his previous involvement in design consulting and contract manufacturing have made him appreciate EDA. "This business is a dream. I love EDA," he said.