When I was at Cadence, one of my jobs was to be the technical interface to investors and analysts. The finance organization, with its investor relations department, could handle all the numbers but if anyone wanted to talk about technology then I was the person that got called in. I knew enough about the technology across the whole product line to be credible, and I was house-trained in what I could and could not say to investors. If you ever have to spend any time talking to investment analysts or the press then you know that they will try and get you to reveal things that are coming down the pipe. Here’s the phrase to drill into your brain to bring out on autopilot at such times. It firmly says nothing without being rude: "We have no announcements to make at this time."
One of the analysts back then was Jay Vleeschhouwer (I bet you leave out one of the "h"s if you type his name without looking) who was at Merrill Lynch until the recent downturn. He was one of the most technical of the analysts that covered EDA and so I spent a fair bit of time with him. He’s resurfaced at Ticonderoga Securities. I had breakfast with him a couple of weeks ago. He’s just finished a big more-than-you-want-to-know report on the EDA industry that is 55 pages long. Ticonderoga have announced that they are initiating EDA coverage (plus coverage of some other software companies). Their (Jay’s) initial stock recommendations are Cadence neutral, Mentor buy and Synopsys neutral. Remember that a good rule of thumb about recommendations is to back them all off to be more negative. So phrase like "strong buy" means "buy", "buy" means "hold", "neutral" means "don’t buy", "hold" means "sell" and "sell" means "you stupid idiot why didn’t you sell this dog ages ago."
Jay estimates that EDA declined by 10% in 2009 to $4.15B after a previous 11% decline in 2008. He’s forecasting growth of 3-4% in 2010 (although this is misprinted as 2011 in the summary but not the body of the report).
I love all the boilerplate risks that SEC rules now kind of make necessary: Risks include better or worse than expected industry conditions; better or worse than expected bookings and product adoption; better or worse than expected share gain; better or worse than expected margin leverage; or better or worse than expected cash flow. In other words, I could be wrong. Jay will also be moderating the EDAC CEO forecast panel later this month, where we can expect Wally to produce lots of quantitative graphs showing how good or bad 2010 will be, Aart to say that Synopsys is in their quiet period so he can’t say much, and Cadence to predict that 2010 will be better than 2009 since it could hardly be otherwise.