( ESNUG 485 Item 10 ) ------------------------------------------- [05/27/10]
Subject: The VENDOR perspective on the recent Cadence-Denali acquisition
SHOW ME THE MONEY: The EDA vendor reaction to this merger was chiefly about
money matters. (Why does that not surprize me?) It was everything from a
cheer for bringing "value" back to small EDA companies, to a more sinister
"happy CDNS paid too much" to "yay, Sanjay!" for such a big score.
"Cadence just announced it's wholly acquiring Denali for $315 million."
"As an EDA *vendor*, is this is GOOD news or BAD news? (CHOOSE) Why?"
GOOD. A valuation of 6X revenue helps the EDA ecosystem!
: ########################## 26%
GOOD. Spending $330 M cripples CDNS for future acquisitions
: ##################### 21%
GOOD. Smart purchase; Denali has a killer product line
: ############### 15%
BAD. Consolidating "good" EDA co's is bad for EDA overall
: ############### 15%
GOOD. It's fantastic that Sanjay and Mark made a mint!
: ############## 14%
GOOD. This acquisition helps stop Synopsys world domination
: ############# 13%
BAD. Oh, no! The world famous Denali DAC party is history
: ########### 11%
BAD. Cadence will mess up this merger like it alway does
: ####### 7%
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As an EDA *vendor* -- GOOD news. EDA startups now have a comparable
acquisition price - just like when your neighbor sells his house
easily and for a lot of cash, your house is worth more and can expect
good selling price. This will help EDA startups to raise money from
VCs who have stopped investing in EDA technologies since there were
no exit opportunities.
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GOOD. Synopsys has been on its own buying binge lately and most likely
suffering a bit of a hangover so I can only guess it was their intent
to have Cadence buy Denali at an inflated price to even the field a bit
and perhaps chew up cash reserves so that CDNS is less able to buy
anything else near term, but I doubt it will have any significant
impact on other EDA vendors, unless it triggers more aggressive M&A
activities which could help some smaller EDA companies that have been
hanging around waiting for a sugar daddy exit.
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GOOD news. I believe Cadence needs to compete better against Synopsys
in the IP arena. This acquisition helps Cadence achieve this. Denali
has a good IP portfolio. I still think Synopsys has the upper hand.
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It is a good but costly buy. Hopefully, Cadence is not rocking the
boat and will financially survive with this.
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Good, if you are Cadence as it brings them closer to world domination.
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This is great news for smaller EDA companies like EVE. I would guess
that the valuation ought to be around 6X, but, of course, Denali is
quite profitable.
Congratulations to Sanjay.
- Lauro Rizzatti of EVE
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As an EDA vendor, this is good news. It shows that there are valid
business models that still make EDA companies a viable investment.
- Prakash Narain of Real Intent
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This is definitely GOOD news for our industry and we applaud Cadence
for taking a bold step in paying 6X for this acquisition. This is a
good reflection of the value of a differentiable, high-margin company.
It has been a long time for our industry with depressed valuation and
bottom-fishing practices for acquiring innovative companies. A rising
tide will definitely lift all other boats in the EDA waters.
- Vic Kulkarni of Apache
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With a purchase price to revenue ratio of over 6, it shows Cadence valued
the strategic importance of the technology. This can be considered a
major step relative to the health of the EDA Industry.
- Howard Martin of Zocalo Tech
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Good maybe, but Cadence paid way too much.
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Good news, Denali has stability now
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"GOOD". Anyone expanding shows a bright future for EDA.
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It is good for Cadence as they had no impact on the IP market.
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Good for Cadence, probably not so good for Synopsys. Cadence gets
a quality set of products. If they manage to integrate them into
their verification environment to the exclusion of other simulators
it will give them an edge.
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BAD. Even more consolidation, more signs that EDA is not a healthy
place to be in. But at least the valuation is not ridiculous, so
there is a silver-lining.
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As an EDA vendor, it's bad news: The Denali DAC party is usually
awesome.... Seriously though, I am kind of ambivalent to actually
positive. Probably because the product I'm working on doesn't
compete in that area, and Cadence likely won't have as much cash
to throw at tools and technology they used to.
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Bad news. It will end with another tool that provides value to the
end user being distributed almost free of charge -- good for the
IC vendors -- bad for the EDA world.
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I guess there won't be those cool Denali parties at DAC anymore. :-(
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Good news. CDNS lost market shares on EDA licenses that will never
come back.
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Not good news.... CDNS paying too much $$ for a small EDA player Denali.
Not good deal for Cadence investors ...but great deal for Denali.
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GOOD
The visible part: Good valuation for a good company. M&A is part of
EDA lifeblood, and the blood is starting to flow again.
The yet-to-be-seen-part: If this acquisition does support and realize
part of the Cadence EDA360 vision to expand the EDA market to new users
at higher levels of abstraction, what's to not like?
- Mike Gianfagna of Atrenta
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Bad in that the consolidation continues and Cadence is moving lots of
jobs overseas.
Bad for IP vendors in that independent IP companies do not appear
sustainable.
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Good: Cadence just used up a lot of cash.
Sanjay and his shareholders just got a nice payday,
congratulations guys!
EDA investors now once again have hope for insane valuations.
Bad: For users of Denali's models on ModelSim and VCS.
What does this mean for the Denali party at DAC?
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Good news. Highlights to entrepreneurs and investors that there are
possible exits in EDA.
On the technical front our SpectaReg register management product competes
(sort of) with Denali's Blueprint. As time went on Denali stopped
offering/supporting this as an individual product and I reckon Cadence
will support it even less, but time will tell.
- Jeremy Ralph of Productive EDA, Inc.
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So much for the famous DAC parties.
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Bad news initially for SNPS; but if it's like every other CDNS merger,
they will mess it up, piss off the Denali people and in the end it
will be better for SNPS
Too bad. SNPS needed a decent shot in the arm verification IP wise.
Could be good/bad for users depends upon execution; and if CDNS now
starts cutting other EDA vendors out.
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It's GOOD news for the Denali founders & employees, hopefully they did
well in the acquisition. It is also tough to compete and differentiate
against the larger companies without a full suite of tools.
Its BAD news for the EDA industry, it continues to consolidate and
another player is gobbled up.
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GOOD news. Confirms that IP adds value to EDA. Confirms that market
is improving for investing in EDA and IP. And, of course, good to see
Cadence marching forward with a focus. Healthy competition is good
for EDA users and the people in the EDA industry!
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I think this payout is great news short term for Denali's employees,
especially Sanjay and Mark who own the company outright. They were
historically very generous to employees so I bet/hope that they cut
their longtime employees into the kitty. Whether or not being at
Cadence long term will be good for them remains to be seen. Some
employees may have been compensated so well that they can use this
cash cushion/op to look for greener pastures beyond EDA...
I think it is also good news for Cadence too and potentially users;
that is if they can keep the Denali technologists and the Denali
marketing magic, which uniquely endeared Denali to users and the rest
of the industry.
The problem is the words "Cadence" and "magic" haven't been used in
a positively worded sentence in a long time. Cadence would be
wise to learn from Denali's openness. Denali's DAC parties did more
for that company (and the EDA biz) than they will ever know.
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This is GOOD news for the EDA industry for one big reason. EDA is an
industry that requires investments, typically from VCs, to thrive.
Investments are the lifeblood of the industry, and lately the industry
has been on life support. Innovations usually come from the start-ups;
but abysmal and pathetic business practices by the Big 3 first gutted
EDA stock valuations, and then dried up VC investments because there
were few attractive liquidity paths for EDA start-ups.
This acquisition, while not staggeringly high, is a respectable metric
of 6X revenues and 21X earnings. It proves there is life in EDA after
Fister, who tried to single handedly run the entire EDA industry into
the ground. Congratulations to Cadence for stepping up to the plate
and congratulations to Denali for not selling out on the cheap! I only
hope Cadence can make the acquisition successful to end users and
shareholders alike now.
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Bad, it's nice when some EDA *vendors* remain available to other larger
EDA vendors. Things fall apart quickly when a large company buys a
smaller company that everyone uses. We'll have to wait 1-2 years for a
new startup, and to wean ourselves off of Denali (Cadence).
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Neutral: I don't think this is a very effective strategy for Cadence,
doesn't augment their position as an EDA leader in any meaningful way.
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Bad News. Limits competition.
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As an EDA Vendor, I think it is good for us. One competitor has been
removed (take your pick Cadence or Denali). Given that Cadence's track
record of successfully selling VIP and Design IP is poor, seems like
they will loose Denali's market share over time. That means opportunity
for other remaining existing vendors. Perhaps a year or two ago I would
have had a different view, but we have seen Cadence try to build and/or
buy their own IP porfolio several times over the last 15 years and fail
each time. The most recent attempt was 2 years ago with their purchase
of all the Specman VIP from a collection of vendors that wanted to get
out of the business because Specman was shrinking & couldn't make money.
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GOOD. Reasons: a) Cadence gains market share with improved product
portfolio. b) Customers would prefer to have single vendor for
multiple solutions.
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Good. Cadence needs to grow it's silicon IP business to compete against
Synopsys. Denali needs deeper pockets, more minds, more marketing, tech
doc, product support and standards committee resources. Cadence gets to
focus it's deep tool and analysis capabilites on a specific set of useful
customer problems.
It also grows CDNS revenue stream beyond Virtuoso, Conformal & Encounter.
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Good news. Cadence paid a bunch of money. They won't recoup it. In
this case, what's bad for Cadence is good for the other EDA vendors.
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May be good for Cadence, they never had anything (good IP or VIP) to
counter balance Synopsys's dominance.
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GOOD. Happy to not have to have the temptation to ever work with
Denali again and waste my valuable time.
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Nice pay day. ;-) I didn't know that there was that much value there.
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Industry consolidation is a good thing because it means the ecosystem
is alive and kicking. It also gives the next small guy a chance to
rise up and compete as the Borg forces assimilation.
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GOOD/BAD to Cadence. On the GOOD side, Cadence has more weapons to use
while dealing with customers. On the BAD side, it may make Cadence
worse if synergy of merger is not realized due to culture conflicts, etc.
BAD/GOOD to other EDA vendors. On the GOOD side, other EDA *vendor*
will take advantage of it if synergy of merger is not realized. On the
BAD side, other EDA *vendor* will lose tool business a bit if synergy
of merger is realized.
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Will the new company be called Decadence? Canali?
Inquiring minds want to know!
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