Cadence quietly buys DFM start-up

By Michael Santarini, Senior Editor -- 5/31/2006

After decades of growth through acquisition, Cadence Design Systems Inc’s new management has been making the rounds telling the press and Wall Street that it is moving away from a growth-by-acquisition business model and that its R&D group will now become the primary source of tool and product innovations (see "Sounding a new Cadence," Electronic News, 5/19/2006). Maybe the company means that it will stop telling people it has acquired companies—at least that’s what its latest quarterly report indicates.

According to the form the company filed with the Securities and Exchange Commission, Cadence last quarter finalized an acquisition of an unnamed company for aggregate initial purchase price of $25.8 million. I was amazed that no one in the business press picked up on it, so, just out of curiosity, I e-mailed Cadence’s public-relations department about the filing. The public-relations department said that company executives decline to reveal anything further. Cadence can get away with withholding the acquired company’s name because Cadence considers $25.8 million an “immaterial amount” relative to earnings.

Management may be a bit naive if it thinks its R&D department can innovate next-generation flows. For those of us who have followed EDA for a while, it is difficult to believe. Cadence didn’t create a single tool for the last retooling, the retooling before that, and probably the one before that. I bet 99.999% of Cadence’s revenue comes from acquired tools. It accrued its entire digital-implementation suite from acquisitions. Indeed, three or so years ago, Cadence dropped to second place after Synopsys acquired Avanti. To mount a comeback Cadence in turn bought SPC, Plato, Simplex Solutions, and a few more EDA companies to cobble together the Encounter suite.

Cadence did a good job of quickly getting all those tools to work together to regain first place in EDA. If anything, Cadence’s R&D staff has proved to be a great integrator of EDA technology but have yet to prove to be a great innovator of EDA technology. I can’t imagine the amount of effort it takes to maintain support of legacy tools just for new operating systems and platforms, let alone revise algorithms for all the tools Cadence owns.

Cadence’s previous management team had its faults, but the one brilliant thing it did was to embrace the growth-by-acquisition history of Cadence in launching OpenAccess. OpenAccess has a lot of buy-in from customers because it has a noble motherhood-and-apple-pie marketing message: to ensure that customers can integrate their in-house tools with tools from disparate tool vendors. But let’s face it: The business reason for starting OpenAccess was to help Cadence’s R&D department more quickly and easily integrate tools.

I wonder whether Cadence’s current management team really believes that OpenAccess is a good idea or whether it secretly curses it. I wonder about the fate of OpenAccess and, for that matter, the fate of other standards that Cadence generated. If Cadence’s Skill language is any indicator, we’ll have to be patient while the current Cadence regime repeats the same mistakes as it predecessors. Most foundry execs say that the 65-nm process node doesn’t require a physical-design retooling but may need some new DFM (design-for-manufacturing) tools. But they also expect that the 45-nm node will require a new retooling. If that’s the case, I suggest that Cadence keep OpenAccess alive and thriving, because, if history is any indicator, it will need it. At least it should ensure that its actions don’t contradict the company’s corporate messaging.

By the way, EDN learned that the company Cadence purchased is DFM start-up Praesagus Inc (Campbell, CA). In the acquisition, Cadence gains the company’s physics-based interconnect-thickness-variation modeling technology. My bet is that this acquisition is just the quiet beginning of a DFM-start-up-acquisition binge in the EDA sector. We’ll see.

You can reach Senior Editor Mike Santarini at (408) 345-4424 and michael.santarini@reedbusiness.com

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