License and maintenance was very strong this quarter (7.5%) and stronger than overall EDA in the first quarter of 2012 which increased 6.3 percent to $1536.9 million, compared to $1446.4 million in the first quarter of 2011. The numbers were held back by services (-3.8%) and IP (5.4%). Walden Rhines, EDAC chair and chairman and CEO of Mentor Graphics Corp., noted that EDA is at a run rate of over $6B. “ESL was strong, logic verification was strong, hardware acceleration was strong and physical verification was strong” noted Rhines. “Power analysis has been strong in the past but was weak this quarter, although it is too early to call a trend.”
Breaking the numbers down a little further and looking at the growth rates for each product category:
The largest category, Computer Aided Engineering (CAE), generated revenue of $564.8 million in the first quarter of 2012, which represents a 6.5 percent increase over the same period in 2011. The four-quarters moving average for CAE increased 11.9 percent. Substantial growth is still seen in the ESL space, with increases of around 15% a year. This is very different than the number reported by Gary Smith EDA at DAC this year. Rhines noted that this is attributable to the different ways in which the two organizations track numbers. As an example he stated that the figures from Gary Smith include transaction-based acceleration and software verification. Hardware acceleration was the fasted growing segment within this category.
IC Physical Design & Verification revenue increased to $350.9 million in 2012, a 10.2 percent increase compared to the first quarter of 2011. The four-quarters moving average increased 15.7 percent. A first look at the number may make one think that everything is going well and maybe even an increase in the number of design starts. Unfortunately it is physical verification that is growing and design tools continue to be negative, indicating that designs are getting fewer and it is getting harder to ensure that they will work correctly. The strongest areas were resolution enhancement, mask data preparation and yield enhancement. Layout and physical implementation were weak.
Printed Circuit Board and Multi-Chip Module (PCB & MCM) revenue of $147.5 million represents an increase of 5.1 percent over the previous year. The four-quarters moving average for PCB & MCM increased 3.9 percent.
Semiconductor Intellectual Property (SIP) revenue totaled $391.3 million in the first quarter of 2012, a 5.4 percent increase compared to last year. The four-quarters moving average increased 18.5 percent. This is a surprising number as it shows weakness compared to the rest of the industry. Again, one figure does not make a trend but something to keep an eye on, but Rhines noted that this is the first time in recent history that IP has not led the way. Rhines speculated that this could be because of the strength in Europe and the US rather than Japan and APAC.
Services revenue was $82.4 million in the first quarter, a decrease of 3.8 percent compared to last year. The four-quarters moving average increased 9.3 percent.
The Americas, EDA’s largest region, purchased $661.5 million of EDA products and services in the first quarter of 2012, an increase of 9.8 percent compared to 2011. The four-quarters moving average for the Americas increased 16.3 percent.
Revenue in Europe, the Middle East, and Africa (EMEA) was up 8.2 percent on revenues of $261.7 million. The EMEA four-quarters moving average increased 10.9 percent.
First quarter 2012 revenue from Japan decreased 11.1 percent to $262.4 million compared to last year. The four-quarters moving average for Japan increased 0.2 percent. Rhines said that Japan is facing a number of pressures right now. There have been announcements in the press related to relationships with TSMC, outsourcing becoming more prevalent, consolidation, bankruptcy, and many other changes.
The Asia/Pacific (APAC) region revenue increased to $351.3 million in the first quarter, an increase of 14.4 percent compared to the last year. The four-quarters moving average increased 21.3 percent.
Headcount in the EDA sector is not only up but accelerating. In the fourth quarter of 2011, headcount increased by 1.7 percent and up 3.2 percent from 4th quarter of 2010. This quarter saw an increase of 0.8 percent and a 5.3 increase over 1st quarter of 2011. I asked Rhines if he expects to see acceleration in hiring given that revenue numbers are increasing faster. He responded that it appeared that companies would either need to continue hiring or show increased profitability.
Brian Bailey – keeping you covered
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