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Financial Markets Yawn as Cadence-Mentor Ordeal Ends

It’s official: Cadence has dropped the bid to take-over Mentor. Primary reasons:

  • Cadence couldn’t raise enough debt money
  • FTC (Federal Trade) indicated that the regulatory review may take awhile.

Most folks in the EDA community are breathing a collective sigh of relief. The merging of these two companies did not make much sense from either a technology or end-user perspective.

What is the response of the financial community? Its more of a yawn than a sigh since the acquisition offer was a mere $1.6 to $2billion, depending on the price per share. To put this in perspective, consider the recent Anheuser-Busch buyout by InBev for $52 billion.

What does it mean for the future of EDA? Cadence’s withdrawal of the bid for Mentor was due as much to misleading (tho not illegal) accounting practices as to anything else. But I think the event will mark the last time one of the big three tries to take over one another. It’s more likely that an outside player will acquire one of the big three. (see previous blog)

One final observation: The only growth path for a maturing (read “fewer new users?) EDA industry is innovation. Yes, I know “innovation? has become a cliché used by the insightful and clueless alike. So let me clarify: I’m using the word to mean truly innovative technologies as well as strategic acquisitions in the revenue generating supply chain side of the EDA and semiconductor industries.

But even with remarkable strides in innovation, the EDA industry seems unlikely to grow much larger. Not because there isn’t a market to grow into – in the semiconductor or package- and board-level industries – but because those markets are already populated with competitors.

–> Mike Rogoway’s Silicon Forest blog has a nice summary of financials

6 Responses to “Financial Markets Yawn as Cadence-Mentor Ordeal Ends”

  1. harry the ASIC guy Says:

    Hi JB,

    I think you hit the nail on the head. Sean Murphy wrote in an opinion piece in SCDSource that Cadence would be better off if they would “buy six, twelve, or twenty-four start-ups that have innovative offerings”. And I also encouraged in my blog (shameless plug) the EDA companies to try something new.

    My prediction…for companies that don’t innovate and insist on fighting it out in the “red ocean”, look for open-source offerings and innovative licensing models like short-term licensing and pay-per-use to commodotize their products and drive their ASPs down. In that world, only the innovators will survive.

    harry the ASIC guy

  2. John Blyler Says:

    Hi Harry. I’ll have to check out Sean’s comments. Certainly agree that innovation is the key. But how best to measure innovation? Another grey area is the issue of buying start-ups companies, especially since I suspect that there has been a decline in the growth of EDA start-ups. A graduate student is doing some research for me that should confirm this point.

    A common set of licensing practices would help to normalize the playing field. But just ask Cadence about licensing challenges. Good comments- thx!

  3. Gary Says:

    John,

    Did you leave a word out? “The merging of these two companies did >>not<< make much sense …”

  4. John Blyler Says:

    Thx, Gary. You’re right. It’s been corrected.

  5. Daniel Says:

    For Cadence to acquire smaller, complementary companies requires the keen insight of Joe Costello. The last I remember Joe was running some 3D software company. I say it’s time to bring him back into Cadence, kind of like Apple bringing back Steve Jobs.

  6. John Blyler Says:

    Hi Daniel. I think bringing back Joe would really give Cadence a moral boost!

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