I attended Magma Design Automation Inc.’s (LAVA) shareholder meeting on September 17, 2009. The company offered attending shareholders coffee, water, untoasted bagels with cream cheese, and assorted pastries. There was no prepared informal presentation.

CEO and Chairman Rajeev Madhavan handled most of the meeting. CFO Peter Teshima also answered several questions. Both CEO Madhavan and CFO Teshima responded to my questions with energy and confidence. I asked several tough questions, and I received good answers. Some quick points:

F1Q10 Earnings Call

August 27, 2009 5:00 pm ET

F4Q09 Earnings Call

May 27, 2009 5:00 pm ET

All four major EDA players recently announced their results which, as expected, were not too encouraging. In this piece, we will provide an analysis of the industry’s recommended moves for the immediate future.

Synopsys

F3Q09 (Qtr End 02/01/09) Earnings Call Transcript

February 26, 2009 5:00 pm ET

2008 was a particularly bad year for many industries, and for the already failing semiconductor infrastructure industry the recession could not have come at a worse time. Here is a quick discussion of how semiconductor infrastructure stocks fared during the year.

EDA company Cadence has only started to fall this year. The company did make some daring moves during the year by making a hostile bid for Mentor. After that, CEO Mike Fister departed amidst total chaos. Cadence now needs a turn around CEO really badly. The stock, meanwhile, is trading only at $2.75 levels.

EDA stocks were not looking up when the market was good, and they definitely aren’t any better now that economic conditions are bad. It’s time to take another look at the EDA (electronic design automation) companies.

Not surprisingly, Synopsys (SNPS) continued to be better than the rest. With Q4 revenues of $353 million, the company recorded annual growth of 12% and sequential growth of 3%. The market was expecting revenues of $350 million.

F2Q09 Earnings Call

December 4, 2008 5:00 pm ET

Atlas America (ATLS) 10% Owner Cobalt Capital Mgmt bought 61,442 shares @ $27.47.

Calpine (CPN) 10% Owner Luminus Energy Partners bought 944,275 shares @ $10.38; 10% Owner SPO Advisory bought 3,156,400 shares @ $11.19 and $11.70.

There seems to be a misconception between semiconductor revenues and other business sectors of the industry, namely equipment, chemicals, and photomasks. In reality, all four components are loosely related at best.

Semiconductor Revenues – Revenues are a comparative measure of performance that will determine market share. It's not the revenues that count, it's a company's profits that determine stock performance. A company's capital expenditures (capex) to purchase equipment and build new fabs are loosely based on revenues, but are more closely tied to capacity and technology nodal points. A company will need to spend if they can't meet demand because they are capacity limited. Likewise, companies will spend to move to a tighter technology note (i.e., to 45 nanometers from 60 nanometers) to maintain leading edge product introductions and market share.

F1Q09 Earnings Call

August 28, 2008 5:00 pm ET

This has been a sleepy week here in the Valley, but it’s time to wake up: this afternoon brings a boatload of pre-Labor Day earnings news. It’s pretty much the last gasp for the June and July quarter companies; with tomorrow the last trading day of August, it’s almost time for the first round of September-quarter pre-announcements. Something to look forward to when you get back from the beach.

The big news after hours will be Dell’s (DELL) report on its fiscal second quarter ended July. The Street is expecting sales of $15.95 billion and profits of 36 cents a share.

Mentor Graphics (MENT) has had a rollercoaster second quarter. Cadence made a hostile takeover bid for Mentor in June of this year, only to revoke it last week. Mentor’s stock slipped 20% after the end of bidding to $10.33. Yesterday’s announcement of the Q2 results managed to lift the stock 10%. It is currently trading at $11.48.

I have not been too optimistic of the EDA industry’s growth potential. (Read: Future of EDA and Future of EDA: Addendum). Last December, I had also recommended that investors stay away from Magma (LAVA). Its Q4 results announced last month were in line with my predictions.

For the quarter, its revenues of $55 million grew by 9.7% over the year but were short of the market’s expectations of $56.7 million. However, the EPS of $0.17 was marginally better than the street’s expectations of $0.16. The EPS grew by 89% over the year.

F4Q08 (Qtr End 04/06/08) Earnings Call

May 1, 2008 5:00 pm ET

Magma (LAVA)

F3Q08 Earnings Call

Magma Design Automation, Inc. (LAVA) provides electronic design automation software products and related services, and is our fourth, and final company in the EDA review. In February 2007 I reviewed Magma, and noted the company was a potential acquisition target given its legal problems in a losing patent fight with Synopsys (SNPS). I pondered on the possibility of Synopsys taking over Magma, and how that might restructure the industry at the time.

Since then, much to much to Synopsys’ chagrin, Magma won a re-examination of the involved patents in March, and gained leverage for a settlement in which Magma paid out $12.5 million and all other terms are settled and final. “For us, this case has always been about the return of Synopsys technology and the protection of our IP, and we have achieved this,” said Aart de Geus, chairman and CEO of Synopsys. And in response, Rajeev Madhavan, chairman and CEO of Magma noted, “I am pleased we found common ground for a resolution that makes business sense for both of us.”

It turns out, that Cadence (CDNS) has seen a strong stock appreciation over the last two years after its CEO change in 2004 (Mike Fister replaced Ray Bingham, Fister being a veteran semiconductor industry guy, whereas Bingham was visibly uncomfortable with the highly technical nature of this business). However, will this sustain?

The overall EDA market grows very slowly, so much of the existing vendors’ growth comes in the expense of one another. In this round, the company that has taken a beating is Magma (LAVA), with a patent dispute against Synopsys (SNPS) that has not gone in their favor. Magma, at this point, is probably an acquisition target. For a few years, they were a challenger to the big 3, including Mentor Graphics, which I have previously said needs to be purchased by an LBO firm and broken up.

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