Most recent blog entries

My granddaughter, Ruth Cooper, is a new mom!

joel.orr@gmail.com — Tue, 01 Jul 2008 08:00:00 GMT

If you've been to COFES, you've met Ruth. Her husband Jason called me a little while ago to say that Ruth gave birth today at 8:27 pm EDT to a healthy boy! Name, weight, etc. to follow...Ruth is feeling great, as is Jason the new dad - and of course, the entire family!

Happy great-grandpa Joel

Will the ‘Big 3’ EDA Vendors soon become the ‘Big 2’ ??

russ.henke@cyonresearch.com — Sun, 29 Jun 2008 15:43:00 GMT

Mergers & Acquisitions are hardly rare in the world of Computer Aided Engineering (CAE) or Computer Aided Design (CAD). Indeed, seldom does a quarter pass without one Electronic Design Automation (EDA) vendor buying another. The same is true in the Mechanical CAE and Mechanical CAD/PLM industries.

Indeed, being acquired by one of the top three vendors in EDA or in MCAD is a favorite exit strategy for small start-ups that develop a specialized or breakthrough technology. This exit path is especially attractive as the IPO market for venture-backed companies dries up.

While EDA companies usually buy smaller EDA companies, and MCAD companies likewise, it’s not unheard of for crossover to occur. For example, MCAE vendor ANSYS recently acquired EDA vendor ANSOFT.

More unusual, however, is for one of the leading EDA or MCAD vendor companies to acquire one of the other members of their respective oligopolies.

Such a possibility recently surfaced in the news, wherein CADENCE (San Jose, CA) is reportedly pursuing MENTOR GRAPHICS (Wilsonville, OR). CADENCE, SYNOPSYS, and MENTOR are currently the Big 3 EDA vendors, in that order size-wise. Founded in 1981, MENTOR reported revenues in 2007 of about $850 million. CADENCE was founded in 1988 and sported revenues of more than $1,600 million in 2007.

Rumor has it that CADENCE approached MENTOR on a friendly basis some months ago regarding an all-cash acquisition, but CADENCE was rebuffed. One June 17, 2008, CADENCE revealed that its offer to MENTOR was for $16 per share, a 30% premium over MENTOR’s closing price on June 16. Industry sources say CADENCE is now pursuing a hostile takeover of MENTOR.

MENTOR issued a statement rejecting the CADENCE offer on two grounds - that it was too low and that the merger would have trouble passing federal antitrust review. "For these and other reasons, our board unanimously rejected the proposal," wrote MENTOR CEO Dr. Walden Rhines. (Dr. Rhines joined MENTOR in 1993 from TI).

For its part, CADENCE downplayed the possible antitrust issue. CADENCE also said the merger “would lower software costs and benefit electronics makers because CADENCE and MENTOR could “share” sales and administrative staffs”. Further, CADENCE CEO Mike Fister argues that the software products of CADENCE and MENTOR are “complementary”. (Mr. Fister joined CADENCE in 2004 from Intel).

It would be highly unusual if this merger, like many others, did not result in significant numbers of employee layoffs, should it eventually be consummated. Moreover, there are several product lines at both EDA vendors that are arguably directly competitive.

But hey, hostile takeover attempts are the signs of our times (think Microsoft-Yahoo, Staples-Corporate Express, Electronic Arts-Take Two, InBev-Anheuser Busch, …).

Indeed, it was reported in the Portland Business Journal on June 24, 2008, that MENTOR itself is pursuing British company Flomerics Group PLC with an offer that Flomerics' board ironically says is too low. Flomerics is a vendor of Computational Fluid Dynamics (CFD) simulation software. MENTOR extended until July 2, 2008 its offer of about $47.1 million for Flomerics, whose market cap on June 24 was $47.8 million. Flomerics' board has urged shareholders to reject MENTOR’s offer. MENTOR already owns almost 30% of Flomerics, having purchased just over 20% of Flomerics' outstanding shares in March 2008.

Oh yes, there is one other complication. Flomerics revealed it is also in talks with AUTODESK (San Rafael, CA). Flomerics announced on June 12, 2008 that AUTODESK had informed the Flomerics board that any offer would be all cash.

All this M&A talk sounds like fun! Except maybe for the employees who may lose their jobs, and except maybe for the vendors’ customers who may face unwelcome product transitions.

Stay tuned!

MSC buys MacNeal

joel.orr@gmail.com — Wed, 25 Jun 2008 08:00:00 GMT

Richard MacNeal (the "M" in MSC) has sold his company to MSC. Read the press release here.

But before you go there, you might want to head over here, and download the new Cyon Research report on the MCAE market, to gain a better understanding of the terrain in this realm. The report is free.

Just in time for the 2008 Summer Solstice

russ.henke@cyonresearch.com — Fri, 20 Jun 2008 01:12:00 GMT

The latest the AP-Ipsos survey results are just in, measured in mid-June. And guess what! More Americans than ever say the country is going in the wrong direction! Seventy six percent (76%) now say the country is definitely on the wrong track. That's up from 71% in April and 66% near the end of 2007.

Some 17% still (inexplicably) insist that the country is going in the right direction. That’s the lowest percentage of die-hards ever recorded by the survey.

The overall level of US pessimism is the worst in almost 30 years, worse than Bush 43’s first recession, worse than Bush 41’s recession, and worse than Reagan’s economic dips. Consumer confidence alone is now the lowest it’s been in 28 years. Most blame the current rising food and gas prices, falling home values and unending war. Imagine that! Asked about Bush 43’s handling of the US economy, 72% said they disapproved.

"For the average American, everything's going wrong. I think there's a lot of reasons for households to be pessimistic," said Mark Zandi, chief economist of Moody's Economy.com.

SuperNova 2008

joel.orr@gmail.com — Tue, 17 Jun 2008 08:00:00 GMT

I'm at SuperNova 2008, in San Francisco. Here are some of the session topics:

The Theory and Practice of Networks • Does Telecom Have a Future? • Networked Business Models • Whose Social Graph? • The Internet is People: What We Know, and What it Means • Cyberspace Constitutional Moments • The Meaning of Openness • All the World’s a Game: What the Web can Learn from Virtual Worlds • Liquid Conversations and Distributed Content • Going Green: Toward a More Sustainable Technology Industry • Who is Driving Marketing Innovation? • Monetization for Today’s Internet… and Tomorrow’s • Wireless Disruption • Privacy and Security in the Network Age • Does the Media Get the Message?

"The shift to network-based computing, services, business processes, marketing, entertainment, social relationships, connectivity, and culture will challenge our assumptions about how the world works. Those who fail to appreciate the complex implications are at risk. Those who can take advantage of the power of the new network face extraordinary opportunities."

If you want to experience some of the talks, there is a live feed (and later, recordings) at this link.

This is the seventh year for SuperNova, and it is a well-connected conference: There is free wireless and there are powerstrips throughout the hall. Almost everyone here is typing on a laptop while the speakers are speaking. For the speakers, it has to be like looking out into a room where 400 people are doing their homework. Odd.

Some random observations:

Average age is 40+
Many people wearing black
Macs seem to greatly outnumber PCs; I think it's a San Francisco/Silicon Valley phenomenon
Many attendees are simultaneously surfing their phones (iPhones, Nokia 95s) and the web
Using mozes.com, we were able to text messages from the audience to a large screen behind yesterday's wrap-up panel; some interesting, some inane comments
Lots of Europeans; I think the strong Euro, weak dollar has a lot to do with that

You'd think it would zing with power and novelty - but it doesn't. Instead, it feels remarkably academic, full of interesting thoughts and conversations, but with no sense of The Next Big Thing. Maybe it's just me. Maybe I'm jaded. But I'm having trouble relating it all to the world of engineering automation.

What are your thoughts? Check out some of the links and let me know where I'm missing it.

EEK !! – US Economic News keeps getting worse…

russ.henke@cyonresearch.com — Sun, 08 Jun 2008 18:16:00 GMT

Friday June 06, 2008 marked the latest low point in the steadily sinking US economy of Bush 43’s second recession, with a one-day triple dose of bad news.

Ongoing unregulated speculation and still more Middle East tensions (e.g. an Israeli official threatened military action against Iran's nuclear installations) drove the price of a barrel of crude oil to a record level above $138, up 13% in just two days. On June 06 alone, crude-oil prices spiked $10.75, the largest one-day gain ever recorded.

Regular gas, now at a record $4.00 per gallon average across the country, will surely and quickly follow the oil spike (CA regular is already at $4.40 per gallon). Ordinary US citizens are not the only ones being squeezed. Truckers and airlines are also suffering. Indeed, any businesses that use raw materials made from oil, like tires, toiletries, paper towels, bath tissues, plastic packaging, paint, mobile phones, light bulbs, cushions, mattresses, car seats, carpets, steering wheels, polyesters, computer screens, etc., are all watching their costs skyrocket, and they have or will find themselves forced into price increases.

And the June 06 US Labor Department report added to the gloom. The US jobless rate leaped to 5.5% in May from 5%, the largest one-month jump in 22 years. Payrolls outside the farm sector shrank by 49,000 in May, the fifth consecutive month of job losses. US Manufacturing continued its long string of losses, shedding another 26,000 jobs in May alone. The US economy has lost 324,000 jobs in just 5 months, according to the government's survey. Also, originally-reported job losses in March & April were revised still lower by another 15,000 people.

As Peter Goodman said in the New York Times, “For tens of millions of Americans struggling to pay bills, the jobs report added an official stamp of authority to a dispiriting reality they already know: A deteriorating labor market is eliminating paychecks just as they are needed to compensate for the soaring cost of food and fuel, and as the fall in house prices hacks away at household wealth and access to credit.”

Completing the triad of bad news, the sense of a downward spiral seized Wall Street on June 06. The Dow Jones industrial average fell 394.64 to 12,209.81, the index's biggest one-day point loss in 15 months.

Meanwhile, of course, Bush 43 remains in denial. "We’re beginning to see the signs that the stimulus may be working," he said in the face of the June 06 economic news.

Bear Stearns disappearing into JP Morgan Chase

russ.henke@cyonresearch.com — Sun, 01 Jun 2008 18:23:00 GMT

The most recent blog entry in this space dealt with Topic #4 from the following May 29 news list:

   1. Scott McClellan’s new memoir about the Bush 43 White House
   2. Bear Stearns disappearing into JP Morgan Chase
   3. SPAM sales on the rise
   4. Q1 GDP being revised up from 0.6% to 0.9%

Today we’ll tackle Topic #2.

On May 29, 2008, Bear Stearns and JPMorgan Chase announced that the stockholders of Bear Stearns, at a special May 29 meeting, approved the merger with JPMorgan Chase. Approximately 84% of shares voted in favor. The merger closed on May 30, 2008. Each outstanding share of Bear Stearns common stock was converted into 0.21753 shares of JPMorgan Chase common stock, and Bear Stearns became a subsidiary of JPMorgan Chase. Also, the NY Federal Reserve Bank and JPMorgan Chase agreed that they will complete the previously-announced sale of $30 billion of assets by subsidiaries of Bear Stearns and the related financing on or about June 26, 2008, a time period “to help ensure the smooth transfer of this large portfolio.”

Ho-hum…just another smooth and uneventful Wall Street deal? Well, not quite.

Lest we forget, in this deal, Bear Stearns shareholders are receiving only a measly $10 a share for a stock was worth some $154 per share only 12 months ago. Also, keep in mind that some 7000 Bear Stearns employees will have lost their jobs in the process

Not that Bear Stearns itself was not culpable. In 2007, as part and parcel of the wide-ranging atmosphere of relaxation of financial regulations by Washington, two of Bear Stearns hedge funds got into trouble with heavy investments in subprime mortgages, forcing billions in write-offs. Then this year, rumors of Bear Stearns poor cash position drove it to near bankruptcy.

Bear Stearns of course was not alone; indeed, since 2007, investment banks around the world have been similarly forced to write down almost $250 billion of debt. In the US alone, nearly 65,000 people have lost jobs at banks, brokerages and mortgage companies in the past 10 months, to say nothing of the general havoc the overall subprime fiasco has caused across the entire US economy.

So what was different about Bear Stearns? Why did the US Federal Reserve suddenly decide to intervene and quickly orchestrate its sale to JP Morgan Chase? The Fed’s Bernanke said his intervention was solely to prevent fallout from Bear Stearns possible failure from “hurting the rest of the global financial system.”

Others disagree. They say the Fed’s intervention sets a dangerous precedent. Where will such interventions stop? How many other similar bailouts by the US government (read over-burdened US taxpayers) will be needed?

The approval of the Bear Stearns merger on May 30, 2008 will not end this story. Also, there are rumors that the SEC is launching an investigation; so we’ll watch to see what if anything results.

Moreover, another, perhaps more lethal danger is emerging. The possible failures of some “standard” US banks in the months ahead. But that’s the subject of a future blog entry.

May 29 News

russ.henke@cyonresearch.com — Fri, 30 May 2008 01:01:00 GMT

So many things to comment on today; too little time…

1. Scott McClellan’s new memoir about the Bush 43 White House
2. Bear Stearns disappearing into JP Morgan Chase
3. SPAM sales on the rise
4. Q1 GDP being revised up from 0.6% to 0.9%
5. …and many more

We’ll leave most of these to another time soon, although #3 is immediately tempting, mostly due to Monty Python and to the fact that dinner time is near.

No, today we’ll talk about #4.

I just have one question: Do you feel luckier, now that the Q1 GDP was actually 0.3% higher in Q1 2008? Well, do ya?

Not I !!.

The number of US jobs lost in Q1 2008 remains at 240,000. There were still 7.6 million US people unemployed at the end of Q1, up from 6.8 million unemployed only a year earlier, and estimates still say US unemployment is gonna get worse. Oil & gas prices are still through the roof. Inflation is still too high. Consumer Confidence is still at a 16-year low. Sales of new US homes are still at their lowest level in 17 years. US housing prices still dropped during Q1 2008 at the sharpest rate (-14.1%) in two decades. Residential investments still fell in Q1 at an annual rate of 25.5%, the fastest drop since late 1981. Meanwhile, US wages and benefits for those with jobs in Q1 2008 were still down. What little strength there was in Q1 2008 came mostly from (a) higher levels of US exports, (b) Bush 43’s war-related spending and (c) a small change in inventories, and was not due to strong domestic consumption and investment. Final domestic sales for the US actually fell 0.1% in Q1 2008, the first decline in such domestic demand since the Bush 41’s recession in 1991.

No, I for one am definitely not feeling luckier because of today’s GDP news.

Break out the Champagne?

russ.henke@cyonresearch.com — Wed, 28 May 2008 00:54:00 GMT

On Tuesday May 27, 2008, the price per barrel of oil dropped from the mid-$130’s that it “achieved” last week, to end trading below $129. Hallelujah?

Well, maybe not! Just as General Petraeus recently warned us all to keep the champagne in the back of the fridge when it comes to IRAQ, maybe likewise we’d better hold off on the “economic toasting” for awhile.

Because the latest economic news is not good, my friends.

While the price of oil did close down a few percentage points on May 27, US average gas prices hit another record high at almost $3.94 a gallon of regular, according to a survey of stations by the AAA and the Oil Price Information Service. Now, enterprising thieves have added puncturing gas tanks and gas lines to steal gasoline to their previous nefarious methods of either siphoning gas, or just driving off without paying after fill ups at gas stations.

While the Dow ticked up a tad (+0.6%) on May 27, the Dow lost a startling 3.91% just last week — its worst showing since February 2008. Other indexes showed similar declines.

Also on May 27, The New York-based Conference Board reported that its Consumer Confidence Index dropped to 57.2, down from a revised 62.8 just last month. The May reading marks the fifth straight month of decline in US Consumer Confidence and is now lower than it was during Bush 43’s first recession in 2001. In fact, it is the lowest reading since the index registered 54.6 in October 1992 – you know, 16 years ago, when the US economy and the citizenry were suffering during Bush 41’s recession.

The downbeat news about Consumer Confidence arrived May 27 just as we also received apparently mixed news about the US housing market. The Standard & Poor’s/Case-Shiller index released May 27 showed that US housing prices dropped during Q1 2008 at the sharpest rate (-14.1%) in two decades, indicating that the US housing slump is still worsening. This index is now at its lowest level since its 1988 inception – you know, the year Bush 41 was elected.

Meanwhile, the US Commerce Department reported May 27 that new US home sales unexpectedly rose 3.3% from March to April. It was the first increase in six months and might seem like a harbinger of happier days ahead. But perhaps the May 27 housing news isn’t “mixed” after all! April's new home sales looked better mostly because of a large downward revision to the March 2008 numbers! And the median home price fell 4.2% last month. Alas, even after the slight uptick in April 2008, sales of new US homes are still at their lowest level in 17 years.

No, better keep that champagne in the back of the fridge for awhile. That is, if you can still afford to pay the electricity bill.

Autodesk vs. Vernor: It's a big precedent for ALL software vendors

brad.holtz@cyonresearch.com — Fri, 23 May 2008 05:00:00 GMT

Here's all you need to know about the Autodesk vs. Vernor ruling:

1. Software "licenses" where the customer pays upfront a single fee for perpetual use of the software, with no obligation to return the software, must be treated by the courts as if it were a sale. Therefore the application of copyright law follows the first-sale principle.

2. Software vendors can get avoid have this ruling apply in any one of several ways.

a. renting the software. The Autodesk vs. Vernor ruling interprets a fully paid up perpetual license as a sale. If the license is not perpetual and fully paid, the interpretation of sale would not apply.

b. require the customer to return the software at the end of use. This would leave open the possibility of negating one of the conditions of the Wise decision on which this ruling is based.

I recommend the following CADCAMnet article for additional reading: http://www.newslettersonline.com/user/user.fas/s=63/fp=3/tp=47?T=open_article,969809&P=article

Full text of the decision can be seen at: http://www.newslettersonline.com/user/user.fas/s=63/fp=3/tp=47?T=open_article,969810&P=article