Synopsys announced their earnings a couple of days ago. This is actually also the end of their fiscal year. They had quarterly earnings of $539M meaning that they did just over $2B for the year. Their guidance for fiscal 2015 is revenue between $2.185B to $2.225B. They said that about 80% of that revenue is already in backlog.
But it is some of the color that I think is more interesting if you are looking at the whole industry and not just trying to decide if Synopsys stock is going up or down. For example, Aart said that they have 170 active FinFET designs and tapeouts all the way down to 10nm. Designs in more mature nodes such as 20nm, 28nm and 40/45nm are increasing in complexity since many designs don’t need the absolute most advanced node and the cost of these older nodes seems to be lower.
Aart went on to put Synopsys strategy down explicitly. The headline is to continue to invest in EDA but also broaden the product portfolio to address a more diversified set of customers.
Priority number 1: Maintain clear technical, business and support leadership in core EDA. This will mostly be through organic growth, rather than acquisitions. Synopsys introduced several major developments this year such as verification compiler and IC Compiler II, and there are more to come in 2015.
Priority number 2: Drive continued growth in IP and Systems, leveraging the confluence of increased outsourcing of IP, growing technical complexity, and the essential customer need for trust and reliance on its partner suppliers. Synopsys is already the #2 supplier in IP (ARM is #1) and the trend towards design being a combination of IP assembly and software has them in a good spot.
Priority number 3: Expand our presence in the software-quality, test and security space by building on the excellent technology from Coverity. This is a two-pronged strategy, firstly selling software quality products into the software groups associated with chip designs, where obviously Synopsys is already engaged. But also sell into:the large untapped software-applications market that reaches from financial to health, energy, retail, social media to virtually any company doing sophisticated software and having quality, security and testing issues.
Core EDA is relatively slow growing (“single digit”), despite the huge investment required to create leading edge tools that keep up with the process node transitions. Like the queen in Alice Through The Looking Glass, it takes all the running you can do to stay in the same place. Or as Aart put it in the Q&A:So, one hand same old, same old. On the other hand, same old has always meant very rapid progress.
IP is growing faster (“double digit”) and getting increasingly profitable. In Q4 Synopsys closed a multi-year agreement for 16, 14 and 10nm IP outsourcing with AMD and hired 150 of their engineers into their IP team. They already have some 10nm IP wins.
The Coverity space is a huge new market. About half of Coverity’s business is in embedded software but the other half are in pure application software markets. Coverity should be breakeven by middle of 2015 with revenues of over $100M in 2016.
This was Brian Beattie’s last call as CFO since he has been promoted to run all the adminstrative operations of Synopsys, including IT, HR and strategy. Trac Pham is the new CFO.
In the Q&A Synopsys was asked about their largest customer since they hadn’t said it was over 10% as they usually do. Everyone knows the customer has to be Intel although nobody is allowed to say that word. And it was just over 10% as usual.