Jan 22

Written by: Russ Henke
1/22/2009 7:13 AM 

In past months, blog entries in this space have described the impact of the collapsing US and worldwide economy on relatively large Mechanical CAD (MCAD) and Electronic Design Automation (EDA) vendors, such as Autodesk, Cadence, Mentor Graphics, Synopsys, and the like.

But of course, smaller providers in similar market niches are also affected, sometimes with very harsh results. Take Virage Logic, for example. Virage Logic is a provider of semiconductor intellectual property (IP) for the design of complex integrated circuits. The company’s product portfolio includes embedded SRAMs, embedded NVMs, embedded test and repair, logic libraries, memory development software, and DDR memory controller subsystems.

Virage Logic is one of six public Electronic IP suppliers located in Silicon Valley; Virage’s annual revenues rank it approximately in the middle of this competitive six-pack. But the dominant market lead belongs to ARM Holdings based in the UK; ARM’s revenues are 5X its nearest IP rival, and ARM is the only one of the seven that is consistently profitable. Here’s a list:

ARM Holdings plc Cambridge, UK
Ceva, Inc. San Jose, CA
LogicVision, Inc. San Jose, CA
MIPS Technologies, Inc. Mountain View, CA
MoSys Sunnyvale, CA
Rambus Inc. Los Altos, CA
Virage Logic Corporation Fremont, CA

At its size, life is a constant struggle for Virage Logic, even in good economic times. But the recession of the last year, which has been particularly harsh in recent quarters, has put extra pressure on Virage Logic and the other five struggling CA IP suppliers.

On December 30, 2008, Virage Logic announced that it was lowering (by some 30%) its first quarter revenue guidance, to $11.0 to $11.5 million compared to its previously-announced revenue estimates of $15.5 to $16.0 million. Non-GAAP per share results were predicted to fall into a (loss) range of ($0.08) to ($0.06) versus (a profit of) $0.02 to $0.04 as previously estimated. “The increasing effect of the global economic crisis and resulting impact on the semiconductor industry is unprecedented. The last few weeks of our fiscal first quarter have been equally challenging for us as we manage recent delays in customer orders,” stated J. Daniel McCranie, executive chairman on December 30, 2008.

Then on January 21, 2009 Virage Logic announced an internal restructure. The restructure includes the consolidation of two smaller research and development (R&D) sites into four major R&D centers. As a result of the restructure, the company expects to realize approximately a 13% reduction in labor expenses.

Virage Logic’s restructure will cost jobs in the USA. The restructure will result in the closing of its R&D centers in New Jersey and Minnesota. The development previously done at these locations will be transferred to the company’s larger R&D centers located in its Fremont CA headquarters or development centers in Armenia and India.

Virage Logic's management will announce first-quarter fiscal year 2009 results on Wednesday, January 28, 2009. We’ll keep an eye on them for ya.