( ESNUG 497 Item 2 ) -------------------------------------------- [01/26/12]
Subject: Aart dodges 5 Wall St analysts' questions on SNPS/LAVA overlap
From: [ A Little Bird ]
Hi, John,
About Synopsys acquiring Magma. I cannot believe how Aart is being a
bald-faced liar. During the conference call with analysts on the day
of the announcement of the acquisition of Magma, Aart said (quoted
from call and verified from the call transcript):
"Well, in general, we cannot comment too much of the details of
the products at this point in time, but this (acquisition) is
in an area that is highly complementary."
Thank God someone is able to help out all the analysts (and the Feds) to
show that there is 110% product overlap. I wonder why Aart is finding
it so difficult to just say that? Does the truth about Magma hurt
Synopsys R&D prowess that much?
Please keep me Anon.
- [ A Little Bird ]
---- ---- ---- ---- ---- ---- ----
After I got this email tip, I went and listened to the call recording
on the Synopsys.com web site.
The keywords to watch were COMPLEMENTARY, COMPETITIVE, and OVERLAPPING.
- If Magma tools are COMPETITIVE or OVERLAP to Synopsys tools, Aart
is doing an Anti-Trust no-no by trying to buy up market share.
- If Magma tools are COMPLEMENTARY to Synopsys tools, Aart is safe
because he's just trying to grow SNPS into "new" markets.
- Also, if a specific niche market is overall COMPETITIVE, Aart is
safe because he's not gaining market share dominance or monopoly.
It's a fun little code that the Wall Street guys and the Fed uses to talk
about mergers, monopolies, and Anti-Trust laws!
In his SNPS Q4 2011 Earning Call, I heard Aart read out loud:
"Bringing together the complementary technologies of Synopsys and
Magma, as well as our R&D and support capabilities, will help us
deliver advanced tools earlier, thus, directly impacting our
customers demand for increased design productivity."
- Aart de Geus, CEO of SNPS on SNPS Q4 2011 Earnings Call
The first analyst question asked after Aart's reading was:
"I guess to start with the acquisition, Aart, with all due respect in
your comments, you suggested that Magma's complementary to you, guys.
But it, most people would suggest, I think, that they have quite a
bit of overlap with your core businesses. So just wondering how you
think about how much overlap there is there. How much do you see is
not overlapping? And how do you sort of deal with that potentially
from a regulatory perspective?"
- Richard Valera, Needham & Co, on SNPS Q4 2011 Earnings Call
In reply, Aart gave a B.S. answer that "EDA is a very competitive field with
constant innovation and many tools with many different capabilities..."
Valera came back asking Aart if he had done any Anti-Trust analysis on a
SNPS-LAVA merger and Valera added: "Obviously, Magma much smaller in scale
than the other 3 big players, which I think would be something in your
favor, but still there's a lot of overlap."
(Basically this was the polite way that an analyst can "call shenanigans" on
a CEO who's giving a B.S. answer on a recorded earnings call.)
A second analyst, Raj Seth of Cowen, then effectively asked if Aart planned
on killing off ICC or Talus -- implying a major overlap between the the
SNPS and LAVA tools. Aart replied that he couldn't say until after
the deal was approved.
A third analyst also openly questioned Aart:
"I want to keep beating a dead horse here. In terms of the regulatory
environment that we're in, the deal is like you've got #1 buying #4.
When I look specifically at SPICE simulators and even the strong
combined market share on digital place-and-route, what is it that
gave you the confidence that you felt that you can move forward and
get a transaction like this off?"
- Sterling Auty, JP Morgan Chase & Co, on SNPS Q4 2011 Earnings Call
"Yes, you're beating indeed a dead horse. We won't go much deeper in
this area, but we did very good due diligence on these areas. We have
seen that it's an extremely competitive landscape with actually many
more players than what you're mentioning."
- Aart de Geus, CEO of SNPS on SNPS Q4 2011 Earnings Call
Then later in the call, a *forth* analyst also challenged Aart on this with:
"Assuming that most revenue from Magma side comes from P&R, can you,
Aart, refresh us on place-and-route in terms of what are the market
shares and what are the features of different products? And how will
combining your product with Magma; does that give you a pricing
advantage with a less number of players in the market?"
- Mahesh Sanganeria, RBC Capital, on SNPS Q4 2011 Earnings Call
"Well, the place-and-route market is extremely competitive with many
players. And moreover, most of the players have multiple
place-and-route systems..."
- Aart de Geus, CEO of SNPS on SNPS Q4 2011 Earnings Call
Then after that, Jay Vleeschhouwer (now at Griffin Securities), asked Aart
how long would it be to get any financial benefit from swallowing up LAVA
since it took years to see any benefit from Avanti "then a company that was
barely overlapping with Synopsys..."
---- ---- ---- ---- ---- ---- ----
For completeness, an anon user sent me this in response to the SNPS-LAVA
announcement:
Hi, John,
Other than for marketshare, I don't see why Aart bought Magma. The two
have enormous product overlap.
Synopsys Magma
P&R IC Compiler X - Talus Vortex
Static Timing PrimeTime X - Tekton
Logic Synthesis DC Ultra X - Talus Design/RTL
Full Custom X - Custom Designer Titan MSDP, ADX, etc.
DRC/LVS IC Validator X - Talus qDRC
DRC/LVS X - Hercules Quartz DRC/LVS
Extraction X - Star-RC QCP, QuickCAP
Lib Char X - Liberty NCX SiliconSmart
Yield/Litho Yield Explorer, etc. X - Camelot, etc.
SPICE HSPICE/HSIM FineSim
Fast SPICE CustomSim FineSim Pro
X - denotes tool Aart will most likely kill off. Note no X's for any
SPICE tool. SNPS doesn't End-of-Life them.
Anyway, this merger is good for Synopsys; not good for EDA users.
To requote the tipster who pointed this story out to me: "Thank God someone
is able to help out all the analysts (and the Feds) to show that there is
110% product overlap. I wonder why Aart is finding it so difficult to
just say that?"
Again, readers, thanks for the tip. I wouldn't have found this story with
your help!
- John Cooley
DeepChip.com Holliston, MA
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