Author:Sharat Kaul
Points:
15
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I think the question of whether Synopsys will dominate the EDA market has been answered.
The answer is not an ugly one but rather refreshingly pleasant (for a change!). With the sincere hope of not sounding arrogant, one can look at the market capitilzations, balance sheets, P&L, cash flow statements, etc. of all the publicaly listed EDA companies to get the answer themselves.
The point is how was it done?
Well, my honest opinion is it stems from two key factors. These are 1. technologies that deliver value to the customer and 2. conservative financial accounting and business principles.
1. Bottom-line, Synopsys is and always will be a technology company. Technology is in the DNA of the executive leadership team and in the majority of its employees. Our software has had to desparately keep up with Moore's law for the last 20 years and this by no means is an easy task. But, we seem to be coming to an inflection point with the customers slowing down on the sub micron silicon race. Consumer spending is and will come down which means demand for wafers will drop. Either we leverage older technologies where yields are higher and mask costs (NRE in general) are lower OR we find a way to reduce the NRE associated with the bleeding edge technologies where we squeeze even more die per wafer while struggling to battle physics to improve yields, consume less power, and forever get more processing power. Synopsys technology is constantly improving in every domain to deliver predicatable silicon faster and with the better quality with whatever node our customer's choose to design with. With our tools performaing their jobs in relatively less time, running in parallel, requiring less compute power, and with the most advanced design techniques, we deliver value to our customer by bringing in schedules to meet tight market windows, provide more MIPS for more functionality, and of course low-power so our battery lasts longer, we can talk longer, and we conserve our precious environment all at the same time.
2. It cannot be stressed enough the merits of our ~90% ratable business model. By flattening out our revenue across the term of our licenses, we establish a scientifically precise business model where we can predict our business down to the finest detail of granularity. We took our knocks about 3-4 years ago and the market hammered us ... then. Thank God we did it then and not now! This change in model has positioned us extremely well for this downturn. But Synopsys does not stop there. Even with this health, we are preparing for things to get worse and are taking necessary steps to stay ahead while never backing down on our investments in R&D.
In conclusion, I can understand our customer's point of view on having choices for vendors. Competition never goes away and is good for the industry through innovation. However, vendor consolidation makes business sense during these tough economic times. Executives need to keep things simple - higher demand means lower price. Partnership means collaboration and no more transactional business. We map our organizations at different levels to stay aligned and always look at ways to TOGETHER eliminate redundancies in operations, trim fat, leverage one anothers core competencies, and grow together. |
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