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MCAD and EDA Oligopolies
Location: Blogs Russ Henke |
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| Posted by: Russ Henke |
3/31/2007 10:04 AM |
In my first Cyon blog entry on March 2, 2007, I mentioned that I would
occasionally offer comments on engineering software, particularly for Mechanical
CAD (MCAD) and Electronic Design Automation (EDA). On March 9, the blog entry
related to the recent passing of pioneers in MCAD and EDA. Today it might be
useful to take a moment to compare these two software industries in general,
especially the oligopolies that seem to dominate each.
In MCAD, one usually identifies four vendor companies whose worldwide revenues now
make up a huge percentage of the entire MCAD software industry: Autodesk, Dassault
Systemes, UGS and PTC. Each enjoys reported annual sales near or well-above one
billion U.S. dollars.
In EDA, observers usually refer to the “Big 3” vendors: Cadence, Synopsys and
Mentor Graphics. Both Cadence and Synopsys revenues are well over a billion
dollars per year each, while Mentor Graphics comes in around $800 million. The Big
3 in EDA collectively represent a remarkably high percentage of total EDA industry
sales, perhaps as much as 70% depending on when and how one counts.
Unusually-frequent mergers & acquisitions characterize both the MCAD and EDA
software industries. These transactions usually account for more annual revenue
increments reported by the larger vendors than those revenue increments created by
organic growth. Indeed, being acquired is by far the leading exit strategy of
start-ups and niche software vendors in both MCAD and EDA. Of course, large
vendors themselves are occasionally the subjects of acquisitions, with the
purchase of UGS by Siemens as the most recent example.
The 2006 revenue from the “Top 3” MCAD vendors (Autodesk, Dassault Systems and
UGS) was $4.5 billion collectively, some 33% more than the combined revenue from
the Big 3 EDA vendors ($3.4 billion). However, 2006 net earnings in dollars for
the top 3 MCAD firms were only 8% higher than the net earnings for the top 3 EDA
companies. The Top 3 MCAD total earnings represented 5.2% of their total revenue,
while Top 3 EDA earnings were 6.3% of their total revenue. (Apples-to-apples
comparisons among these vendors and industries are made somewhat difficult because
of differing sales models, as well as by non-recurring write-offs and other events
that affect current earnings).
While the worldwide revenues of MCAD and EDA vendors are relatively small in
comparison to the hundreds of billions of dollars spent annually on software in
general, the leverage and productivity that MCAD and EDA software provide to their
customers and users are profound indeed.
Before leaving the topic of oligopolies, I started to muse about related
oligopolies of the past, just for a fun mental exercise (meaning: no research).
For example, the Top 3 MCAD vendors of the 80’s were ComputerVision, Applicon and
Calma, if I recall correctly. The Big 3 EDA vendors of the 80’s were Daisy,
Mentor and Valid. The top workstation suppliers of the 80’s were Apollo, Sun and
HP. The leaders in PC’s in the 80’s were IBM, Apple, Radio Shack and Compact.
The top digital computer makers of the 70’s were IBM, Univac, Control Data and
General Electric. The top minicomputer makers were DEC, Data General, HP, and
Prime. The leading CAE vendors of the 70’s were MSC, Swanson Analysis and SDRC.
And so on. Maybe readers of this blog entry would like to submit their own lists?
Of course, one can go too far with this exercise. Having just paid $3.36 per
gallon of regular gas here in California, I am unhappily reminded of the
exorbitant, record profits of the worldwide “big oil” oligopoly in recent years.
Hey, I wouldn’t mind paying more for gasoline if the extra money went mostly into
clean fuel research or repairing the deteriorating U.S. highway & bridges
infrastructure. But just to make the oil barons richer? – No way! Of course, this
leads to making a list of the three worst United States’ presidents in history…oh
well, better to end here for today. |
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