Friday, August 3, 2012

Synopsys moves to fill their analog design tool gap with Springsoft acquisition

On Friday, August 3, Synopsys Inc. ended the week as they had started it, with an acquisition targeted at shoring up the EDA vendor's greatest weakness, a lack of commercially successful analog design tools. On Monday, the company announced they were buying Ciranova, developer of PyCell Studio, which Synopsys relies on for generation of OpenAccess-based layout cell libraries to support their Galaxy Custom Designer product. Ciranova also provides the Helix tool for performing analog layout placement.
Ciranova is one of a number of ~10-year old EDA startups seeking a long-awaited exit, having received a total of more than $27M in VC funding since their founding in 2002. In 2010, Synopsys joined Mentor, Intel and long-time Ciranova investor Alloy Partners with the last injection of capital into the late-stage startup. Synopsys has invested heavily in their attempts to develop a competitive product for Cadence's market-dominant Virtuoso suite, including hiring much of the original Cadence R&D team.  Nevertheless, Custom Designer has been mostly relegated to internal use by Synopsys' mixed-signal IP developers. The tool has failed to gain any significant market traction. The Synopsys strategy of building a Virtuoso clone has been a failure. There is little to incentive users to switch, when they have many years invested in customizing their analog design flow with Cadence's still proprietary SKILL language.

Following the Ciranova deal, today Synopsys essentially abandoned their in-house effort to develop a competitor for Virtuoso, by announcing the acquisition of Taiwan-based Springsoft for US$406M. Synopsys is estimating that the net purchase price will be US$305M, net of cash acquired. The parties expect the NT$57.00 per share deal to close, pending shareholder approval, by the end of January 2013. Springsoft's last closing price on the Taiwanese stock exchange, before the deal was announced, was NT$45.65.

The coveted pieces in the Springsoft acquisition for Synopsys are the Laker tools for custom IC design. Laker was originally created by SiliconCanvas (acquired by Springsoft in 2008), and quickly became one of the few viable competitor's to Cadence market dominance in the space, at around the same time as Ciranova began operation.

Springsoft's revenue was flat for several years, but began growing steadily after the 2008 Laker acquisition, when the company also added Novas design debugging tools, along with a few other small EDA vendors. Ironically, the company can trace it origins to the founder's work in creating what eventually became Cadence Taiwan. Springsoft recorded 2011 annual revenue of just greater than US$77M.

After sitting on its cash for some time, Synopysys' latest spending spree brings their total to nearly US$1B of acquisitions in the last nine months. In February, Synopsys completed their US$507M acquisition of Magma. A comparison of other recent ~US$300M priced EDA acquisitions over the last few years, such as Cadence-Denali,  Synopsys-Virage, and ANSYS-Apache, makes it appear that Synopsys got a steal with Springsoft. Some of the steep rise of the Springsoft revenue curve above is due to the rising value of the New Taiwan dollar to the U.S. dollar. Springsoft's growth, normalized to their national currency, has been ~4% per annum. It would appear that Springsoft's owners are also looking for a 10-year exit, about the limit for VCs everywhere.

NOTE: This analysis of the Synopsys-Springsoft acquisition is a preview of a more detailed EE Daily News Strategic Insight Report to be published in the coming weeks. For a pre-publication discount on that report, contact

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