Not Everyone Feels The Pinch

Some design tools companies show strong growth in the midst of one of the worst economic downturns in decades.

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By Ed Sperling

In the midst of the longest and deepest downturn since the invention of the transistor, not everyone is doing badly. In fact, there are some bright spots across the electronics industry that seem to defy gravity, so to speak.

In particular, design tools are doing well. When the industry is down, they’re typically down less because, as any successful executive in technology will tell you, the only way out of a recession is to design your way out. If the recession ends and there are no new designs ready for the rebound, that could be a career-limiting move at best. At worst, it can kill a company.

This is reflected in sales of EDA and other design tools. While the industry overall is down, some companies are posting record growth.

Synopsys, for one, saw its Q4 revenues rise by 11.9 percent. It expects to post year-over-year growth for the current quarter, as well, according to published statements. Mentor Graphics, while reporting some slippage in revenues due to delays in contract renewals, said the company is extremely well positioned heading into 2010.

In the virtual prototyping market, Carbon Design Systems posted 87% year-over-year growth for 2008 versus 2007, and 108% revenue growth. While that kind of growth is remarkable even in good times, it’s particularly noteworthy in a downturn that began in December 2007. Rick Lucier, Carbon’s president and CEO, said in a statement that he is confident that growth will continue based upon support from the IP community.

In the high-level synthesis world, Forte Design Systems posted 30% growth in Q4 and finishing off 2008 with a record year in terms of revenue and bookings.

In the embedded world, some areas are at least showing a pulse. Designs are under way in the retail point of sale market, signage and the medical electronics fields and third-party vendors anticipate these segments will be out of the recession relatively early.

Intel’s commitment to invest $7 billion in new fabs in the United States also is likely to stir up some business in areas such as capital equipment, EDA tools and the IP market.

And at least one investment banking firm has raised its opinion of chip stocks. In his blog in Seeking Alpha, Eric Savitz astutely noted that UBS has suddenly turned bullish on chip stocks, upgrading a slew of them. Given the fact that the market has been diving lately, that may seem like a stretch. But with banks lowering interest rates on short- and mid-term CDs, coupled with the likely design activity that will begin to bear fruit later this year, it doesn’t look like such an odd shift.