|Summary: Recently, Magma's Rajeev Madhavan gave an interview in which he said "I believe that within five years only two EDA companies will survive. We will therefore be one of these two big companies, or we will have been bought by one of them." Is he right, in either assertion? If so, why? Comments welcome.|
While at the Silicom Ventures international summit in Israel recently, Magma’s Rajeev Madhavan gave an interview to Globes Online, a local business magazine. In this interview, entitled Chip Design is for the rich, Rajeev stated
“I believe that within five years only two EDA companies will survive. We will therefore be one of these two big companies, or we will have been bought by one of them.”
Wow. That’s a staggering assertion, and enough to make this life-long EDA guy sit up and notice. It’s either incredibly bold and ballsy or a plea to be acquired, and you can read it how you wish.
I can’t believe it’s evidence for a plea to be acquired, given that Magma’s market cap is less than 40% what it was this time last year. Even worse, the 52 week forecast is for $10, still far beneath the high water mark of the last 12 months ($15.44). So if it’s not acquisition time, maybe it’s a bold statement of intent, laying down a challenge to the other three broadline EDA companies. Let’s consider the evidence; taking on perhaps the greatest EDA franchise of synthesis; kicking Synopsys (a company unafraid of using litigation to assert and protect their rights) in the behind, to start off an expensive and extremely hostile action; buying Mojave to attack the LVS market; entering analog & mixed-signal design and verification. The desire to become a broadline supplier is pulling them in many different directions, and while the field may be excited, the impact on AEs, financial resources, and management attention is significant, if difficult to quantify.
Of course, you have to buy into the statement that there’ll only be 2 EDA companies in 5 years time - down from over 250 at the time of writing. It’s no surprise that we’re coming in to a time of consolidation - growth in EDA has been sluggish at best. With the bigger fish looking at the smaller fish as ‘temporarily outsourced initial R&D’, that’s still a lot of chewing and swallowing for the bigger fish.
I don’t buy into the two company thesis. Maybe it’s just Rajeev being Rajeev. Or maybe, just maybe, he’s channeling Joe Costello - the spirit of EDA past.