) recently announced the completion of the acquisition of a
privately-held electronic design automation (EDA) company,
Ciranova. The company largely works on delivering productivity
improvements in custom integrated circuit ("IC") design.
Specifically, Ciranova limits the time and effort needed to develop
transistor-level layouts at advanced nodes.
Synopsys intends to utilize Ciranova's technology, which to
speed up enhancements in its custom IC solutions. The latter's
technology will help the design teams to effectively meet the
productivity challenges that arise as a result of complexities in
Strategic acquisitions have always been Synopsys' plan to
strengthen its product portfolio and it is helping the growth
strategy. During 2011, the company made a number of acquisitions.
In October, Synopsys completed the acquisition of privately-held
electronic design Automation Company; Extreme DA. Again in
January 2012, the company acquired privately-held software maker
Integration of Extreme DA was easy, as it had the same line of
business as that of Synopsys. Not only has Synopsys gained from
Extreme DA's technology, but also from the utilization of its
experienced human resources, particularly engineers and sales
Acquisitions might be a prudent way of expanding the company
inorganically. However, Synopsys needs to make bigger acquisitions
to compensate for the modest growth rate in the industry.
Even if the company finds larger targets to acquire, we believe
that funding could be an issue given the recent slowdown in the
business, which has impacted results. This apart, the revenue
contribution by the acquired companies remains uncertain, as the
industry-yet to pick up and generate additional business volume
Synopsys' product innovation strategy, the popularity of its
time-based license model and its strong cash position are
positives. Although Synopsys is gaining traction from new products
and acquisitions, we believe these might take a quarter to produce
favorable results. Besides, the company is also facing competition
Cadence Design Systems
Synopsys currently has a Zacks #2 Rank (short-term Buy
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