Synopsys-Coverity Deal Final

Synopsys’ acquisition of Coverity, which makes tools for testing and analyzing software, was made official yesterday. Now what?

That may be the $334 million question, which is the price Synopsys paid for the 11-year-old software tools vendor. Even Synopsys’ top executives are rather candid in their uncertainty about where this deal will lead, and they made no qualms about that at the Synopsys User Group this week. Dealing with a slew of companies ranging from McAfee to SAP to Barclays is well outside the EDA and IP space. But they’re certainly not questioning the value of the deal. As more of the functionality in hardware is controlled by software, this acquisition appears to be less of a leap than it looks from an EDA-centric vantage point.

EDA companies are certainly no strangers to acquisitions. In fact, the industry has thrived largely by consuming startups after they have developed their first products but before they gain enough market traction to warrant high market capitalization. In some cases, those acquisitions have been far afield, such as Mentor Graphics’ acquisition of companies that develop wiring harness designs, RTOSes and BiST, and Cadence’s acquisition of IBM’s test design automation group and more recently Tensilica, a DSP/dataplane processor vendor. But for the most part, the Big Three EDA companies have stuck to their individual scripts.

Coverity on the surface looks like one of the out-of-the-box acquisitions, particularly because the customer base is so different. But applying some of the same rigor to software development as hardware—particularly when it comes to power and performance—opens some interesting opportunities for Synopsys. How that plays into Synopsys’ core business remains to be seen, though, because for the moment the companies will remain at arm’s length.

“It’s obvious to everyone that the role of software in the world is just exploding,” said John Chilton, who will serve as senior vice president and general manager of Coverity.“We see in our traditional customer base that many companies are hiring more software engineers than hardware engineers. Then you look outside…and many industries are based on software. Their main differentiation is based on software. They’re essentially software companies, whether they’re energy companies or retail companies or telecommunications companies or oil and gas companies. It’s all built on a software infrastructure.”

Chilton said it’s clear that big changes are needed in software, given the number of news reports about security failures, breaches and glitches. He cited a 2013 study by Cambridge University, which estimated that software bugs are costing the global economy $312 billion per year.

“The scary part isn’t what happens now,” he said. “It’s what happens five and 10 years from now if this problem doesn’t get solved. We’re entering into an era where software is in cars interacting with navigation systems, getting much more interactive. We can’t afford to spend trillions of dollars on software defects. It’s time to put some real engineering power behind this.”

And there’s no doubt that’s exactly what Synopsys intends to do. Chilton, until this acquisition, was the senior vice president and general manager of strategy and business development at Synopsys. His new position, plus a hefty purchase price and a huge infrastructure for distribution of these kinds of tools, could well point to a big adjacent growth market for Synopsys in particular, and EDA in general.