Synopsys / Magma Acquisition Debate!

[Daniel Nenni]

The calls and emails are still coming in for more information on the SNPS / LAVA acquisition: Magma customers, ecosystem partners, lawyers, and even a government agency. Is it just me or is this event getting a little too much attention? Maybe we are bored and need a little excitement? Or is this really a turning point in EDA history?



The most interesting conversations were with the lawyers trying to profit from it. Interesting enough, not one of them I talked to had any idea what EDA really is and why this acquisition is good for the semiconductor ecosystem.

In regards to the product overlap and market segment monopolies discussion; Will Synopsys assimilate the Magma product line? Of course they will. Synopsys is the number one EDA brand for a reason. They spend millions of dollars every year on company and product branding. Let’s not forget how many companies Synopsys has assimilated thus far: EDA Mergers and Acquisitions Wiki . But for every product that Magma has there are plenty of start-ups waiting in line to fill that parking space. Take simulation for example, check out the Spice and Fast Spice Vendors Wiki and see for yourself.



One of the big advantages of being Magma was that they were NOT Synopsys or Cadence. Ask any of the former Magma sales guys, which is not hard to do since there are so many of them. Now dozens of under-funded “emerging” EDA companies can fill that role and emerge in a much more profitable fashion. Which brings us to another important PRO acquisition point, big EDA companies did not get to be big by organic growth. Inorganic growth, growth by acquisition, is how Synopsys, Cadence, Mentor, and even Magma got to be what they are today. If we don’t promote feeder fish EDA companies, where will future big EDA fish growth and innovation come from?

The most compelling PRO and CON acquisition point is pricing. Magma has been the “affordable” EDA company since day number one, climbing to the number four position by under cutting Synopsys, Cadence, and Mentor. If you ask me why Synopsys paid a premium for Magma, which they absolutely did, it is to bring our ASPs back to a scalable level. PRO for the EDA industry? Absolutely. CON for the semiconductor companies who will either have to pay a more reasonable price for the tools that help them generate $300B+ annual revenues or work with feeder fish EDA companies on new innovative tools that will enable faster growth for both the EDA and semiconductor industry.



What happens if this acquisition does NOT go through? The Magma sales pipeline is broken, ask any current or former Magma sales guy. Customers will buy the Magma Fear, Uncertainty, and Doubt pitch Synopsys and Cadence guys are no doubt selling. My bet is that Magma stock dips below $5 and gets assimilated anyway. If you think I’m wrong put an iPad3 where your mouth is!

[daniel_payne]

I get phone calls from an investment company representing LAVA share holders asking, "Will this deal go thru or get blocked?"

My answer is, "Yes, the deal will go through because consolidation is natural in EDA and a small #4 player getting acquired by a large #1 player is routine."

Yes, they do have 12 products that directly overlap, so for EDA users their are big questions about which tools remain, get discontinued, or get merged into a combined successor tool.


I don't expect that Rajeev will actually become a Synopsys employee, instead I expect a press release announcing that, "Mr. Madhavan has left to pursue other interests".

[LinkedIn]

It's the same roundabout: the small guys bring the new ideas and functionality, but the "integrated platform" is a given these days, and these belong to the big boys. Magma apparently turned the profitability corner, so they can't be drastically underpricing.
Are there huge costs in integration, or are the big boys cross-subsidising (analog to support digital- yeouch if so), or are they just inefficient. Other than that most of my favoured tools were originally developed by very small teams but then charged at large-team rates once taken into the large-company folds, I don't know the answer.

Personally, I would prefer to see the likes of Magma able to charge nearer Synopsys rates, and not get taken over. Unfortunately, it takes time for the credibility level to build up to the point when you can make those charges, and the new companies have investors to satisfy (a bird in the hand being worth two in the bush, etc.)

Of course, the worst outcome for the community would be if the Synopsys bid lapsed after crippling Magma's progress as an independent entity
Posted by George Storm

[LinkedIn]

A good counter point to: Expect aftershocks from Synopsys' Magma acquisition


And follow-up to: Synopsys Acquires Magma?!?!?!?!?

[Paul McLellan]

One Wall Street guy I talked to said basically that nobody knows anything: "Many clients I have spoken to today that own millions of Magma shares believe that the review will be extended later this week. I also talked to someone within the industry yesterday who was highly confident that the merger would be approved this week."

And in EETimes here is Jim Hogan's view: Expect aftershocks from Synopsys' Magma acquisition

[Paul McLellan]

My view, based on what I've heard around the valley, is that the deal will go through but there will probably be some sort of consent decree (like when Cadence acquired CCT over a decade ago) perhaps around opening up some of the circuit simulation and timing infrastructure (since Synopsys has almost all the circuit simulators and all the almost all the timing tools). I think Berkeley DA is likely a big winner as the most credible "alternative" simulator for people who used FineSim and for one reason and another don't want to be hostage to Cadence and Synopsys. It might have been good for ExtremeDA too but...Synopsys already acquired them.

[daniel_payne]

Paul, I'll guess that there will be NO consent decree because we have dozens of SPICE and FastSPICE circuit simulators out there. Looking at the DAC list of exhibitors there is no lack of competitors to every tool that Synopsys/Magma own together.

[Daniel Nenni]

Even more significant, less than 15% of the responders think I'm an idiot. That is down from 50% this time last year. This clearly supports the claim that my IQ has doubled since the launching of SemiWiki. My wife counters that I should not brag about doubling such a small number.

[Pawan Fangaria]

As per my last article, I am of the view that consolidation will take place between EDA vendors
and then between EDA and Foundries/Fables design companies, considering technology as well as
economic conditions to save profit margines.

[nitindeo]

Dan: I believe this acquisition (or merger) is motivated by two main reasons (equally important):

Business: Eliminate source of price erosion and long sales cycles - whenever there is an aggressive new player in the market this has happened. e.g. Mercedes, BMW and Lexus; or Sony, Mitsubishi and Samsung (TV, DVD, etc.).

Technical: Gain access to technology and R&D talent - Ckt Simulation, custom design and STA. All of a sudden 100+ smart R&D engineers are available.

Was half-billion dollar price tag for these two things warranted? Could SNPS have waited 6 more months to gain the same for less than half? Was there a risk that either Magma will get stronger or someone else (Ansys or Cadence) would grab them?

Well. It is what it is. The merger will go through and Magma will go down in history as the highest valued EDA acquisition - in addition to the highest VC funding and the highest EDA IPO in decades as well as the most news-creating company in a boring mundane industry called EDA! And, of course, we cannot forget the most innovative brand recognition strategy with product names like Blast and Quartz as well as ticker symbol LAVA!