Mentor Graphics makes destroyers out of ski boats: automotive and EDA
Wow, check out Mentor Graphics. Earlier this week the company pre-announced its fourth quarter is going to exceed Wall Street analyst expectations for the fourth quarter (and year)—its stock price has even eclipsed Cadence’s. What’s more impressive is Mentor exceeded expectations for the quarter largely on sales of tools other than those in its Calibre lineup.
Last year I took a bit of a jab at Mentor in my blog entry “Mentor Graphics: All your Apples in one boat,” noting among other things that Mentor’s been very reliant on Calibre as its flagship product while the rest of its fleet is, well, less impressive—ski boats. Well it appears; Mentor’s been busy mounting a couple of guns on those ski boats, perhaps building them up into destroyers, having done some big sales with its automotive electronics and its ESL and verification tools.
One year ago, I wrote a cover story on the opportunity for EDA in the automtotive business and how there simply is a lack of automation in that humungous market. Before I wrote that article, I hadn’t followed the automotive industry that closely. I was amazed when I started to hear the revenue numbers for GM. I didn’t realize how big they were. In 2004, GM’s net revenue was $193 billion. In comparison, the entire semiconductor industry posted revenue of $213 billion. Yet, as I did more research, I found that the EDA industry really has only begun to scratch the surface of the opportunity in the automotive space.
A couple months before I wrote that piece, I had the opportunity to interview Alan Taub GM’s head of R&D for an article in Movers & Shakers and he basically outlined how GM and the automotive industry was going through a retooling and restaffing—hiring more EEs. Taub himself comes from the metal bender, mechanical engineering background—the traditional background for automotive guys. But Taub noted that many of the mechanical parts (actuators and mechanical switches) on a car are rapidly being replaced by electronic switches and sensors. Taub said the industry was moving that direction largely because electrical components are more reliable than the traditional mechanical parts. Electronics is more reliable? I was a bit shocked when I found this little factoid from the NHTSA (National Highway Traffic Safety Administration): More than 25 million vehicles were recalled in 2004, more than any other year. I don’t know what percentage of those recalls were related to electrical or software problems, but I’m guessing at least a few were. I found it especially scary when I started looking at what tools and methods auto makers use to put cars together, which is outlined in my January 2006 cover story. The folks I interviewed basically said electrical system design in automobiles has largely been done on an ad hoc basis and that all the components, electrical and mechanical, come together in the 11th hour. They also noted that most automakers haven’t traditionally done extensive signal integrity and reliability simulation before sending cars out on the street.
So there certainly is a big opportunity out there for the EDA guys. Mentor’s obviously taking advantage of it, and I expect companies such as Synopsys, VAST, Mathworks and National Instruments—with tools playing in automotive—also have a golden opportunity. Way to go Mentor–crow is tasty!
