Almost at the same time, Magma, Mentor and Synopsys reported on their quarterly financial achievements. In addition Magma reported its fiscal 2011 results. The results show that EDA is doing well even in this at times unpredictable financial market. Of course the electronic companies are fueling a significant portion of the recovery in the consumers market, and thus demand for EDA tools remains strong. All three companies have taken advantage of the situation as their financial results show.

Magma Design Automation

Fiscal 2011 was a good year for Magma. It added 41 new customers, expanding its base by 13%. Both the quarter and the year saw significant increase in both revenue and profit and what is to be underscored is that the results are due to both an increase in revenue and a decrease in cost of revenue. Non-GAAP Operating margin was 18.8% showing a good use of assets. This signifies that Magma is keeping costs under control and that the increase in revenue is not due to an attempt to increase sales at any cost.

Revenue for the year was almost $140 million and the fourth quarter results show that Magma does have the opportunity to go over $150 million in revenue in its next fiscal year. Magma has also diminished its liabilities by around $44 million and its balance sheet is looking healthy, as the stockholders equity line returned positive. The fact that its total assets are lower than a year ago is not of concern since liabilities have decreased even more and the drop is due to the company use of cash to lower its liabilities. overall fiscal 2011 was good for Magma, and the introduction of very competitive products such as Tekton and QCP.

Mentor

Given the quarterly results from Mentor I wonder if moving up the stockholders meeting was the best possible strategy for the present management. The results show that Mentor sales are growing, although the strategy of refinancing the convertible debt that generated a better balance sheet in the short term, only postponed the repayment at a higher cost. So, it is a bit like getting a benefit now and hoping to have the money to pay for it later.
Revenue grew by $50 million with related costs growing only $10 million. Operating expenses show that Mentor is managing costs better, at least this quarter, but the company is still loosing money, mostly due to a $17.5 million interest expense for the quarter which directly impacted the per share results that show a $0.02 loss providing further ammunition to the likes of Carl Icahn.

Synopsys

What is more to say about Synopsys that has not been said before? The corporate results continue to show a well managed company. For its second quarter of the fiscal year Synopsys' revenue increased by $50 million over the same period a year ago, to $393.7 million, an increase of 16.4%. Net income for the period from operations was $61.9 million. This is remarkable because it shows that revenue increased while the ration between revenue and operating costs improved. It is hard to argue against such numbers, especially when one considers that GAAP net income of $81.1 million is actually higher than non-GAAP of $68.5 million. The figures show a company that is well managed, has healthy cash position, and can find areas of growth even in a relatively confined EDA market.

So, I might have been wrong when I unconditionally praised Mentor, because compared with Synopsys and Magma their balance sheet shows that more work is required to regain the financial robustness Mentor has enjoyed in the past. but progress has been made, there is no doubt about it, and well before Carl Icahn team could take credit for it.