JB's Circuit

By John Blyler

Rumors are flying as to why Altium is relocating its global headquarters from Sydney, Australia to Shanghai, China.  The relocations have already resulted in the loss of a large portion of the company’s development team in Sydney. Key R&D developers will be retained with some moving to Shanghai. The company hopes to combine the key developers with local talent from Shanghai to grow its development, sales and support activates within the Chinese market.

Some have speculated that Altium may be pressured into the move by China in order to commercialize local Chinese IP into its product.

Other observers point to economics as the real reason for the move to Shanghai.  A quick look at the company’s annual reports shows a 3 year decline of roughly 10% per year.

The official word from the company – via a press release – states that the, “primary motivation for the move is … that China represents the best location and opportunity for the execution of Altium’s plan for … (transforming customer) businesses from product-based models to a service-based approach where web-based ecosystems enable direct relationships between device end-users and device manufacturers.”

In a recent interview with Electronic News, Altium’s Head of Corporate Communications, Alan Smith, stated that “China is investing a trillion dollars in building an indigenous design sector so that ‘made in China’ will become ‘designed in China’. The centre of gravity of the electronics industry is moving to the country and we have made a decision to be part of that shift.”

A differing viewpoint on the focus of China’s electronics industry is offered by one of Altium’s competitors. Mentor Graphic’s PAD product line competes with Altium Designer for the lower end products that involve a single user or small group of designers building FPGA-based printed circuit board assembly.

John Isaac, Director of Systems Market Development at Mentor, suggested that today’s China is focusing on high-tech, high performance, large system products. “Some Chinese companies are competing directly with more advanced US companies, such as the way Hauwei (pronounced WAWAY) competes directly with US-based Cisco,” notes Isaac. “There seems to be a real shift in China from designing low end, more simple products to designing really high-end products.”

If this is true, then China may not hold as much potential for Altium as company executive’s hope.

Adventures at DesignCon – Twitter Logs and a Gold Stocking Woman

Happier times for Altium at DesignCon 2009, when they made a big push into the American market.

Mentor’s woes with Carl Icahn may stem from a misunderstanding of the complicated EDA market rather than the company’s financial condition.

The local paper – the Oregonian – has been dutifully reporting on Carl Icahn’s noisy financial challenges to Mentor Graphics: Casablanca Capital sides with Carl Icahn, castigates Mentor Graphics

An important element in this ongoing challenge is that, until yesterday, Icahn never really offered to buy Mentor at $17/share – a point that Wally Rhines recently confirmed. Rather, Icahn said that “if” he were to buy Mentor, then he would pay that amount. This minor clarification is important since no one has stepped forward to buy Mentor, which means that Icahn has no quick way of exiting the Mentor mess.

I would argue that, in terms of value to the investors, Mentor is no better or worse than Cadence or Synopsys. The challenge to investors is the EDA market, which is a very different beast from, say, the Internet or video rental businesses. (Both Yahoo and Blockbuster were past Icahn purchases.) This is the mistake that I believe Icahn is making, i.e., not understanding the market.

[This is part of an ongoing discussion on Facebook.

By John Blyler

Departure of Intel’s Senior VP and GM of the Ultra Mobility Group may cast doubt upon or show commitment to the company’s embedded mobile market strategy.

The man closely associated with Intel’s ATOM-based push into the mobile computing world has apparently resigned from his post as chief of the company’s Ultra Mobility Group (UMG). For now, Anand Chandrasekher’s position will be co-managed by Intel Architecture Group’s Mike Bell and Dave Whalen.

Chandrasekher’s resignation has renewed speculation about Intel’s commitment to the mobile market. The company is competing directly with current mobile IP processor leader ARM. Also, Intel recently faced a software setback when cell-phone giant Nokia announced a partnership with Microsoft over Intel’s Meego mobile operating system platform. (see “OSCON Shows Breadth of Open Source Software)

Intel issued the following comments:  “Intel remains committed to this business,” said David Perlmutter, executive vice president and Intel Architecture Group general manager. “We continue to make the investments needed to ensure that the best user experience on smartphones and handhelds runs on Intel Architecture, and to ship a phone this year. “We’d like to take this opportunity to thank Anand for numerous contributions to Intel over his 24-year career here, and wish him well in his future endeavors.”

Anand Chandrasekher - Senior Vice President and General Manager of Intel's Ultra Mobility Group (UMG)

The short- and long-term effects caused by activist shareholders like Carl Icahn highlights the dangers of acquisitions based upon non-industry specific financial indicators without an understanding of the industry itself.

Some have noted that Mentor Graphics – an electronic design automation or EDA company – is unique among Carl Icahn’s other holding. EDA is an extremely niche industry in a very technology advanced market space. EDA also has a very constrained customer base with high but typically warranted Selling, General and Administrative (GSA) expenses.

Few claim that Carl understands or even cares about the EDA space. Still, some have reasoned that Mentor might be part of a larger acquisition strategy, e.g., merging Mentor (EDA) with Lawson Software (Product Lifecycle Management or PLM) – another of Carl’s holdings.

Many have wondered about the big picture, especially after the recent recession caused mainly by America’s financial industry. The question that many wonder is if activist shareholders like Carl Icahn really bring long-term value to the “other” shareholders.

Gary Dare, VP of Technical Marketing at Space Codesign, has been following the Icahn-Mentor issue for some time. My thanks to him for calling the following news updates to my attention:

1) Is Carl Icahn Good for Long-Term Shareholders?   

“In terms of Icahn’s effect on other shareholders, we find a significant positive stock price reaction – on the order of 10% – to the announcement of Icahn’s taking a position in the target firm. When examining the subsequent performance of the target firms, we find a very large difference between those firms that were either taken private or acquired (within 18 months) – over a third of the target companies – and those that remained independent. We report that although the acquired group achieved significant positive stock market returns, the firms that remained independent suffered very negative (-60%) returns. Although Icahn’s proposed changes could be responsible, as critics charge, for the performance of the latter group, we suggest that the success of many of these companies in fending off Icahn without enacting most of his proposed reforms is a more plausible explanation. At the same time, Icahn was successful in achieving at least one of his stated objectives in well over half of the cases in which the target companies remained independent. ”

My comments: I believe that this analysis has limited applicability in the EDA space for reasons that I noted earlier. Still, many of us have felt that Carl Icahn’s real goal with Mentor Graphics was to – as Gary puts it – ’scare up’ the value of Mentor’s stock and then cash out. But Ry Schwark, Director of Public Relations at Mentor Graphics, points out a logistical flaw with that reasoning. Ry notes that trade volume for Mentor stock is typically 500k share per day. Carl Icahn now holds 15 percent of Mentor shares/options which would equate to around 16 million shares. As I understand it, if Carl were to sell his shares – being a highly visible Schedule D13 “activist” shareholder – the price of Mentor stocks would presumably fall within the first day of selling 500k shares, leading to reduced stock value on all subsequent days until 16 million shares were sold. I suspect that Carl would find these losses unacceptable, which is why he’s beating the bushes trying to find a buyer for Mentor.

To keep the record straight: Wally Rhines, CEO of Mentor Graphics, reminded me that Carl has not officially offered to buy Mentor Graphics. Rather, Carl has conjectured that, if he were to sell the company, then he’d offer $17/share.

2) Gary Dare: This was reported by Dan Primack of Fortune Magazine on his Term Sheet blog/news letter:

“Golden Gate Capital and portfolio company Infor Global Solutions, has offered to acquire business software maker Lawson Software (Nasdaq: LWSN) for approximately $1.84 billion. The $11.25 per share offer would include a nearly 11% stake in Lawson currently held by Carl Icahn.”

My comments: Last summer, I noted that Mentor moved into the PLM development space with the acquisition of Valor – “Mentor Graphics’ Summer of Discontent”   I surmised that this acquisition positioned Mentor as a “better candidate for a merger with a supply chain company like Lawson,” which might explain Carl Icahn’s interest in Mentor.

Since then, I no longer believe that Carl understands Mentor’s EDA business well enough to have planned for such a merger. Also, I’ve been reminded that no such past union has successfully occurred between EDA and PLM companies. In fact, some of you may remember Cadence Design System’s challenges in the PLM space. Still, the sale of Lawson may yet serve as a useful footnote in the Icahn unfinished chapter of Mentor’s long history.

Here’s a great piece by a superhero in physics – succinct, clever and even a bit funny.

What Science Fiction Got Wrong? by Jim Kakalios

Schrödinger equation – Don’t enter a quantum state without it!

Gary Dare just brought this to my attention: 

Investor offers to buy Mentor Graphic at $17/share

BUT WAIT! I’d suggest reading the last part of this article first, namely:

“The disclosure of the Icahn bid for Mentor comes only four days after his $665 million offer for the Texas power company Dynegy Inc. failed to get sufficient support from Dynegy shareholders and was terminated.”

I’m sure Icahn has more tricks – and turmoil – up his sleve for Mentor. All in the name of sharehold value.

Background on the President’s Trip to Intel and Investments in Education

This Friday, the President will travel to Hillsboro, Oregon and visit Intel Corporation where he will tour the world’s most advanced semiconductor manufacturing facility with Intel CEO Paul Otellini. The President will also learn more about Intel’s STEM (Science, Technology, Engineering and Math) education programs and Intel’s efforts to better prepare people to compete for high-tech jobs and be the minds behind the next great inventions.† He will then make remarks about the importance of out-educating the competition in order to win the future.¬† As he laid out in his State of the Union address and in the Fiscal Year 2012 budget released this week, President Obama believes that in order to win the future for this generation and the next, we must win the race to educate our kids.¬† His plan calls for key investments in education to grow the economy and create the jobs and industries of the future by doing what America does best ‚Äì investing in the creativity and imagination of our people. Intel has committed to investing more than $6 billion in their U.S.-based manufacturing facilities to support future technology advancements in Arizona and Oregon, creating more than 6,000 construction jobs and more than 800 permanent high-tech jobs. The President’s remarks will also be streamed live at www.WhiteHouse.gov/Live.

The Administration has made important strides in achieving President Obama’s goal of challenging the status quo in education and driving forward reform in our nation’s schools. Today’s economy demands a workforce that is smart, skilled, creative and equipped for success in a global marketplace. Building on the success of Race to the Top, he is calling on Congress to re-define and right-size the federal role in education, by replacing No Child Left Behind with a new law that raises expectations, challenges failure, rewards success, and provides greater flexibility for schools to innovate and improve results for their students. The President is also pledging to prepare an additional 100,000 science, technology, engineering, and math teachers by the end of the decade. To help restore America’s global leadership in higher education, the President will continue efforts to strengthen the Pell Grant program and is calling on Congress to make permanent his American Opportunity Tax Credit, worth $10,000 for four years of college.

Companies like Intel are helping us achieve these important education and innovation goals. They know that government and industry must work together so that America can out-educate, out-build, and out-innovate the rest of world.   Over the past decade, Intel and the Intel Foundation have invested more than $1 billion toward improving education.  In 2010, in conjunction with President Obama’s Educate to Innovate campaign, Intel announced a 10-year, $200 million commitment to advance education in math and science in the U.S. Intel is also one of four founding companies of Change the Equation, a CEO-led initiative designed to answer the president’s call to move the U.S. to the top in science and math education over the next decade.

Activist investor Carl Icahn has been very quiet about his reasons for acquiring more and more interest in EDA company Mentor Graphics. That silence has now been replaced with an appearance on CNBC where he and a fellow investor have called for the acquisition or sell-off of the EDA company.

Why generate such attention now? Icahn claims his actions are triggered by Mentor’s sudden change in the date of its annual investor meeting. This means that Icahn has less time to nominate his supporters for election to the company’s board.

Icahn claims that Mentor’s current management is unfit to run the company in part because Mentor’s Selling, General and Administrative (SG&A) costs as a percent of revenue are much higher than the competition – by which Icahn seems to mean Synopsys. The numbers do support this claim with Mentor’s SG&A at about 49 percent and Synopsys’s SG&A at roughly 32%.

But the comparison is a dubious one, at best. In terms of total revenue, Mentor is far closer to Cadence Design Systems than Synopsys. When stacked against a similar competitor like Cadence, Mentor’s SG&A is right in line.

There are several other differences between the two major EDA companies which Icahn and his colleagues choose to ignore. One area of difference is the way Mentor and Synopsys report revenue and bookings, which affects swings in the stock prices. Another difference lies in the basic structure of the two companies. Some have suggested that Mentor’s structure allows the various divisions to have greater freedom to explore and profit from new ventures. Typically, such freedom comes at the price of duplication of some selling, marketing and administrative costs.

But do Carl Icahn and his fellow activist investor, Donald Drapkin of Casablanca Capital, really have legitimate concerns about Mentor’s value to all its investors? After the US has suffered through the last 3 years of near financial collapse caused in large measure by banker and investor recklessness, many technical professional wonder if these concerns are driven more by profit seeking than long-term value for the investment community as a whole.

Would the EDA industry be better served by the disruption caused by yet another acquisition attempt on Mentor or a sell off? (Recall attempts by Cadence (2008) and Cidadel Financial Group (2006) – see below.) EDA companies are in a market that is difficult for business investors to understand. The industry itself is morphing into a new form, as evidenced by the increasing pace of acquisition and the shrinking pool of new start-ups. To meet the global shift to high-volume, low-priced and low-power consumer market, EDA is evolving from a collection of optimized sub-system companies to an ecosystem of tightly integrated system players.

This is a delicate time for the EDA space. The last thing that is needed is a replay of the Wall Street’s recklessness that destroyed an economy while benefiting a select few.

Reference stories:

• Carl Icahn fires first salvo in battle for Mentor Graphics’ future
• Mentor Graphics’ Summer of Discontent

For all you science geeks out there, consider this blog as my chip and quantum computer design “weird science” update. [Weird because quantum mechanics is weird … cool weird, but still weird.]

•  NIST Advances Single Photon Management for Quantum Computers

Today’s electronics are based upon a flow of electrons. Conversely, quantum computers will use photons or particles of light instead of electrons. One of the first steps in building a workable quantum computer is to create an on-demand photon generator. Two recent papers by The National Institute of Standards and Technology (NIST) scientists define a mechanism for creating and delivering such photons. In their works, these scientist describe not only how to produce a steady flow of photons but also how to do so one at a time and only when needed by the computer’s processor. (see Figure 1)

Why build a quantum computer in the first place? The reason is simply that such systems could perform calculations that are impossible using conventional computers by, “taking advantage of the peculiar rules of quantum mechanics.”

For more developments on quantum computers, see: “Quantum Computers Move A QuBit Closer To Reality”

Figure 1: Gated photon source starts with the bright green laser beam that strikes a crystal and is converted into pairs of photons (false colored blue here, it’s at the end of the red spectrum) and (in the infrared, false colored red here.) The “blue” beam is the herald channel, the “red” beam goes through a spool of optical fiber (right) to delay it long enough for the gate to open or shut. Credit: Brida, INRIM

•  IMEC Launches New Research Program on High-Bandwidth Optical I/O

Optical systems, like their quantum brethren, are also based on light. Since nothing that contains any information can travel faster than the speed of light, the medium makes an ideal candidate for high-bandwidth interface I/Os between deep-submicron CMOS chips. The curious thing is that deep-submicron chips are now designed at the nanometer level, where the effects of quantum mechanics begin to actively affect the flow of electrons.

Isn’t it interesting how the two worlds of quantum mechanics and light keep impinging on one another?

IMEC, the world’s leading-research center in nanoelectronics, has just launched a new research program aimed at high-speed, high-bandwidth optical interfaces for communication between chips. If anyone can shine some light onto this problem of achieving mind-boggling communication speeds between integrated circuits, it’s IMEC.

Figure 2: Silicon-photonics wafer processed at IMEC’s fab.

One time-honored way to achieve the ever conflicting trade-off between high performance and low power is by manufacturing ASIC designs at a lower process node. This approach works especially well with digital circuits, which scale more easily to lower nodes than their analog brethren.

One indicator of this trend toward lower manufacturing geometries is the shrinkage of the process node of current and future FPGA-based ASIC prototypes. Designers use such hardware prototypes to architect and verify the newer or more troublesome portions of their latest leading-edge chip designs.

Currently, the trend is toward prototypes targeted at designs below 65nm (see Figure 1). This trend is hardly surprising. Early in 2010, Xilinx announced that their latest generation of FPGAs was manufactured at the 28nm process node. On the processor side, Intel recently announced the building of a new 22nm fab in Oregon.

Figure 1: Three-year trends in manufacturing process nodes for current ASIC/ASSP/SoC prototypes based on FPGAs. (CDT Survey)

Perhaps of greater interest is the rapid movement in chips designs planned at below the 65 nm process node.  In a 2010 survey, when ASIC designers were asked for the target process nodes for planned ASIC/ASSP/SoC prototyping designs, an overwhelming majority listed “Below 65nm.” (see Figure 2)

Figure 2: Three-year trends in manufacturing process nodes for planned ASIC/ASSP/SoC prototypes based on FPGAs. (CDT Survey)

This 2010 increase in “Below 65nm” designs represents a substantial increase from the previous two years. It also confirms an increase in capital expenditures for the new semiconductor equipment needed to support the lower process geometries. For example, Gartner recently reported that semiconductor equipment spending grew by a record 131% in 2010. Early predictions are for the spending to be flat in 2011, in part because the new systems are now in place. Equipment purchases in 2011 should focus more on capacity than supporting the latest technology node. 

FPGA chips continue to become ever smaller in size, lower in power while denser in transistor count and hence end-user functionality. To achieve these capabilities, chip manufactures must upgrade or replace existing equipment to systems that support the latest process nodes. Data from a number of different sources confirms that this is the phase of the chip manufacturing life cycle that exists today. We can look forward to more products designed to below 65nm process nodes in the near future – at least in the digital world.