Dec
14
Written by:
Russ Henke
12/14/2008 5:44 PM
Electronic Design Automation (EDA) vendor
Cadence Design Systems has been a frequent subject for blog entries in this space for months, especially since its CEO and four other executives suddenly resigned back in October 2008. Simultaneously, the company also delayed reporting its Q3 2008 financial results to launch an investigation of its financial methods and practices for all of 2008.
Well, on December 10, 2008, Cadence finally reported the results of said investigation, and the news was not pretty.Cadence said it actually lost $169 million, or 67 cents per share, for Q3 2008, which certainly compares unfavorably with profit of $72.7 million, or 24 cents per share, in Q3 2007. The Q3 2008 revenue of course also declined dramatically, falling 42% to $232 million from $401 million in Q3 2007. The much-reduced Q3 2008 revenue figure still missed analysts' most-recent pre-December 10 estimates for Q3 2008 of $239 million.
The company paid a dear price as it finally announced its Q3 2008 results. Trading near $4.00 per share early last week, Cadence shares had plunged to $2.73 each by close of trading on Friday December 12, 2008, resulting in a meager Market Cap of only $710 million. (Cadence shares then sank to $2.50 each in after-hours trading on Friday).
As previously blogged here, the other two Big 3 EDA fellow travelers have also suffered during Bush 43’s year-long recession. Between December 31, 2007 and December 12, 2008,
Mentor Graphics shares have declined in value from $10.78 each to $5.14 each, resulting in a Market Cap today for Mentor of only $475 million.
(During the same period, Cadence crumbled from $17.01 to $2.73 per share). By these measures,
Synopsys is a relative star, falling from $25.93 per share to “only” $17.81 between December 31, 2007 and December 12, 2008. As a result, Synopsys Market Cap remains a healthy $2.52 billion.
Back to Cadence:For Q4 2008, Cadence is forecasting revenue of only $215 million to $225 million, well below analysts’ recent consensus of $247 million. The Q4 loss is forecast to be ~5 cents per share, although analysts’ predict ~7 cents per share loss.
By the way, Cadence also announced on December 10, 2008 that it had completed an accounting review, saying it will restate $24.8 million in revenue from the first quarter of 2008 and $12 million from the second quarter.
More significantly, the company’s own review found that a contract was improperly accounted for early in 2008, but that no illegal activity had occurred on the part of its executives or employees. That’s a relief!