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EDA Community Alive with Opposition to Cadence Take-over of Mentor

We can all share a collective sigh of relieve that Mentor has rejected the take-over bid from Cadence. In their response, Mentor’s CEO – Walden Rhines – cited reasons of undervaluation and risk of not gaining regulatory approval for rejecting the offer.

The web has been unusually busy this morning with every voice imaginable questioning the wisdom in Cadence’s take-over bid. Even Portland’s own business report – Aliza Earnshaw – has chimed in with comments directly from Mr. Fister.

Not all comments have been public ones. Several semi-private forums in which I participate have also been unusually active, like the Portland High-Tech google group. Here’s a few highpoints from that group:

I agree with both Daniel and Gabe. I can’t see how this merger is good for anyone and Cadence investors should be outraged. The product overlap is just too great.

Sadly, investors aren’t always known for making strategic business decisions. Many myopically follow the short term bottom line. Hope I’m wrong, since such an acquisition would spell the end of Mentor as we know it. – JB

For the sake of discussion, I’ll take a contrarian view. I agree from an organizational standpoint the merger could be bungled, and that similar past acquisitions have reduced employment. Given the recent struggles that both Cadence and Mentor have had to become profitable, though, one could argue that separately they would each be hemmhoraging jobs anyway, and that the combined company could be healthier in the long run.
I also wonder whether the comments about product overlap are overstated. Several of the product overlap areas noted in Daniel’s blog include area where either Cadence or Mentor has a razor-thin slice of the market share pie chart — e.g., Cadence is much bigger in custom IC design, and while Mentor dominates DRC. The big, honking areas of overlap are PCB design, logic simulation and emulation … and with PCB being one of the least profitable EDA businesses, would it be so bad for the combined company to hand off some of that business to someone else? One could make the argument that even in logic simulation that Mentor dominates FPGA but is a relatively small player in ASIC.
Having said all that, if I were a Cadence shareholder (and I’m not – for my job I don’t directly hold any EDA stocks), I’d be pretty uneasy about this. The disclosed excerpts from Mr. Fister’s letter lacked any specificity that would address a shareholder’s concerns.
[JB] Are both companies really “hemmhoraging” jobs?
[Anon] Maybe “hemmhoraging” is too strong a word, but I have heard of incremental layoffs at both companies over the last 3 months. I’m not aware of wholesale cuts of entire product development teams, though.
[JB] System-level design is another area were Cadence would benefit from acquiring Mentor, tho such tools don’t yet seem very profitable.
[Anon] Mentor has been investing in system design tools in various areas including ESL verification and synthesis. Due to Mentor’s financial reporting format it’s difficult to tell how much they make in this business — for instance, their “New & Emerging Products” category includes test products, embedded software, IP, etc. As for Cadence, they have appeared to steer clear of systems design for some time. Cadence licensed SPW to CoWare earlier this decade and since then has not announced any system design products that I’m aware of.

One Response to “EDA Community Alive with Opposition to Cadence Take-over of Mentor”

  1. JB's Circuit » What does Carl Icahn really want from Mentor? Says:

    [...] companies, PLM design vendors (see my comments about Dassault Systems) and even EDA-to-EDA (Cadence’s attempted acquisition of Mentor in the summer of [...]

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