Credit: Shutterstock photoGrowing through acquisitions has been one of the key strategies of Synopsys Inc.SNPS . Keeping with this, the company recently announced the buyout of Simpleware Ltd. Financial terms of the deal were, however, not disclosed.
Simpleware is a privately owned company providing software products that help converting "3D scan data into high-quality computer models used for engineering design and simulation". The company's software is used across a wide range of industries including Life Sciences, Materials Science, Industrial Reverse Engineering and Non-Destructive Evaluation, and Oil & Gas.
Founded in 2000 and headquartered in Exeter, UK, the company has a long list of customers ranging from global blue chip companies to research institutes and universities around the globe. Therefore, integration of Simpleware will not only enhance Synopsys' product portfolio, but also add the former's customers, thereby boosting the top line.
The recent acquisition is in line with Synopsys' continued investments toward enhancing its electronic design automation (EDA) software product portfolio. Synopsys sells EDA software to the semiconductor and electronics industries. In the current economic scenario, customers are strengthening their supplier relationships while focusing on cost efficiencies, which have led many to select Synopsys as their primary EDA partner.
Acquisitions are central to the company's growth strategy and give it access to newer markets and technologies. Some of its notable buyouts include Codenomicon, Coverity and Target Compiler Technologies.
Also, with intensifying competition making the EDA market tougher to penetrate, acquisitions have gone a long way in helping Synopsys accelerate top-line growth. In the first quarter of fiscal 2016, the company witnessed a 5% year-over-year increase in its revenues.
We believe that the company's sustained focus on product launches, acquisitions and deal wins will drive results, going ahead. Apart from this, unique intellectual properties and global support provided by the company will boost its performance. Additionally, the company's acquisitions will expand its reach in the software quality, testing and security tools market.
However, competition from Cadence Design Systems Inc. CDNS and Mentor Graphics Corp. MENT , along with a challenging technology spending environment and uncertainty regarding the exact time of realizing acquisition synergies, keep us concerned.
Currently, Synopsys has a Zacks Rank #2 (Buy). Another favorably anked stock in the technology sector is DST Systems Inc. DST sporting a Zacks Rank #1 (Strong Buy).
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
