Cadence Design Systems Inc, the electronic design automation (EDA) software house and one of the 10 biggest software companies in the world, is showing a continued resilience to the slump within the semiconductor sector. Third quarter revenues at the San Jose-based company grew by 31% to $309m and profits (excluding the now customary acquisition related charges) rose by 21% to $0.29 per share. Including charges of $278m, Cadence turned in a loss of $193m for the quarter against profits of $55m last time. Chief financial officer Raymond Bingham said Cadence had managed to sustain its momentum despite all of the economic problems in Asia and Japan, and had closed its 22nd consecutive quarter with bookings in excess of revenues. The reason, said chief executive Jack Harding, was that Cadence’s electronics manufacturing customers continued to invest heavily in design automation, even while their revenues were falling and operating losses growing. These customers want to ensure competitive levels of productivity when the upswing arrives. Geographically, all regions posted positive revenue gains, including Japan which saw an increase in revenues of 20% in dollar terms. The North America region saw revenues up 49% year on year to $164m as all of Cadence’s big silicon valley fabrication partners invested further. The down side, however, came in the form of lower than expected growth in services revenues said Bingham, which dampened results. Overall, productivity remained steady at $271,000 of sales per employee, Bingham said. Cadence also closed two important deals in the quarter, namely the $260m acquisition of Ambit Design Systems Inc and the buy out of the Bell Labs Design Automation unit of Lucent Technologies Inc for an undisclosed amount. Harding said Cadence was assembling all of the vital components in the ‘system on a chip’ design flow process. The importance of this could not be underestimated, said Harding, because the EDA market was moving inexorably towards a demand for a complete front to back flow. Looking at the semiconductor business more broadly, Harding said he saw the real signs of a recovery on the Horizon following good results from companies like Compaq Computer Corp, Intel Corp and Apple Computer Inc. It’s starting to feel like we may be seeing the bottom of this, he said. Cadence’s revenues have grown strongly throughout the semiconductor slump but its stock has fallen from the high thirties to the low twenties, closing on Tuesday (before these results were announced) at a little over $24.
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