Feb 22

Written by: Russ Henke
2/22/2009 8:25 AM 

The ups and downs (mostly downs) of one of the Big 3 Electronics Design Automation (EDA) vendors Cadence Design Systems have been frequent topics in this blog space since the autumn of 2008.

The last update occurred here on January 9, 2009, when it was announced that Cadence had given up its search for an outside CEO and had appointed Lip-Bu Tan as president and CEO the day before. Tan had been the interim vice chairman of the Board of Directors and member of the Interim Office of the Chief Executive. For the record, Cadence stock closed regular trading on January 08 at $4.12, up $0.09 or 2.23%. In after hours trading, the stock lost 2.36%, trading at $4.02, implying a Market Cap just north of $1 billion.

In early February 2009, Cadence reported actual Q4 2008 revenue of $227 million, less than 50% of the revenue of $458 million reported for Q4 2007. On a GAAP basis, Cadence suffered a net loss of $1.64 billion, or minus $6.57 per share in Q4 2008, compared to net income of $120 million in Q4 2007, or plus $0.41 per share. After the Q4 2008 results were announced on February 4, Cadence shares closed at $3.65, although the shares rebounded the next day to close at $4.20 each.

Note that as late as December 22, 2008, for Q4 2008, Cadence was forecasting revenue of $215 million to $225 million, well below analysts’ then-recent consensus of $247 million. The Q4 loss was forecast by Cadence at that time to be ~5 cents per share, although analysts’ predicted ~7 cents per share loss. Cadence shares closed December 22, 2008 at $3.29 each, yielding a Market Cap of a meager $843 million.

In Q4 2008 alone, Cadence shares fell from $6.76 each to $3.66 each, or minus 46%. During that same period, the average of the decline of the three major stock indexes was ‘only’ minus 22.1%.

Cadence revenue for the full year 2008 totaled $1.04 billion, compared to revenue of $1.62 billion in 2007. The net loss for full year 2008 was $1.85 billion, or minus $7.29 per share, compared to net income of $296 million, or plus $1.01 per share for 2007. In 2008 alone, Cadence shares fell from $17.01 each to $3.66 each, or minus 78%. During that same period, the average of the decline of the three major stock indexes was ‘only’ minus 37.6%.

For comparison, the other members of the Big 3 EDA oligopoly fared poorly in 2008 stock price, but not as poorly as Cadence. Mentor Graphics Corporation shares fell in 2008 from $10.78 each to $5.17 each, or minus 48%. Mentor closed February 20, 2009 at $4.19, for a current Market Cap of just $387 million. Synopsys shares also fell in 2008, from $24.73 each to $18.52, but a decline of only 25%. Synopsys closed February 20, 2009 at $19.48, for a current Market Cap of $2.77 billion. Cadence closed February 20, 2009 at $3.85, for a current Market Cap of $960 million.

Cadence Forecasts for 2009:

For Q1 2009, Cadence expects revenue to be in the range of $200 million to $210 million. GAAP EPS for Q1 2009 is expected to be in the range of a loss of $0.33 to a loss of $0.31.

For the full year 2009, Cadence expects revenue to be in the range of $830 million to $870 million. GAAP EPS for 2009 should be in the range of a loss of $0.99 to a loss of $0.87.

Capital expenditures for 2009 are expected to be in the range of $40 million to $50 million, a decrease of approximately $30 million from a historical run rate.