Magma Design Automation Inc. reported revenue of $34.1 million for its fourth quarter and $147.0 million for its 2009 fiscal year, both ended May 3, 2009. In the fourth quarter Magma generated cash flow from operations of approximately $5.5 million.

The results show that Magma is executing on its plan to return to profitability and regain market shares lost in the second half of calendar 2008. It is bound to be a multi year effort given the negative global financial conditions and the prediction that the semiconductor industry will be down 20% in 2009 compared to the previous year.

While Magma had in previous years tailored its products to the very early adopters of new process nodes and technologies, it has re-architected almost all of its products to be user friendly so that the market of potential customers has expanded significantly.

After a difficult start, Magma is now gaining market position in the analog and mixed-signal design market segment, a growing segment of the EDA industry.

The non-GAAP figures reported below show how the management of the company is performing in the short term. The figures are the most significant in the situation that Magma finds itself, since putting the enterprise on a positive cash flow is of paramount importance.

Magma’s non-GAAP net income was $3.1 million for the quarter, or $0.07 per share (basic and diluted), which compares to non-GAAP net income of $8.0 million, or $0.17 per share (diluted), for the year-ago fourth quarter. For fiscal 2009 Magma’s non-GAAP net loss was $(6.7) million, or $(0.15) per share (basic and diluted), compared to the company’s non-GAAP net income of $27.1 million, or $0.58 per share (diluted), for the year-ago fiscal year.

The long term health of the company, as measured by the GAAP figures reported below, is improving. One has to note that almost 60% of the $124 million operating loss for the just finished fiscal year were due to impairment of Goodwill ($60 million) and restructuring charges of over $10 million.

As I write this piece Magma's stock price is $1.48 resulting in a market capitalization of $69.36 million or less than 50% of its yearly revenue. Certainly the company is undervalued and could still be a participant in a merger or acquisition activity. Institutional investors own 51% of the outstanding stock. Thus the financial markets have a positive outlook on the long term profitability of the company. In fact the stock price is more than double its 52-weeks low of $0.68.

In accordance with generally accepted accounting principles (GAAP), Magma reported a net loss of $(8.8) million, or $(0.19) per share (basic and diluted), for the fourth quarter, compared to a net loss of $(7.2) million, or $(0.17) per share (basic and diluted), for the year-ago fourth quarter. For fiscal 2009 Magma reported a GAAP net loss of $(127.1) million, or $(2.84) per share (basic and diluted), compared to a net loss of $(30.8) million, or $(0.76) per share (basic and diluted), for fiscal 2008.

For Magma’s fiscal 2010 first quarter, ending Aug. 2, 2009, the company expects total revenue in the range of $27.5 million to $28.5 million. GAAP net loss per share is expected to be in the range of $(0.20) to $(0.19) and non-GAAP earnings per share (EPS) are expected to be in the range of $0.00 to $0.01. For Magma’s fiscal 2010, ending May 2, 2010, the company expects total revenue in the range of $120.0 million to $125.0 million. GAAP net loss per share is expected to be in the range of $(0.70) to $(0.68) and non-GAAP earnings per share (EPS) are expected to be in the range of $0.01 to $0.03.

These projections show a very conservative outlook on the part of management. The figures say that the company revenue for the coming fiscal year will be less than those for the year just concluded, although the GAAP loss will be a bit less. Since Magma's management fully intends increasing its share of revenue from EDA, the lower figure must be justified by a further reduction in the size of the available market. I will note that three fourths of Magma next fiscal year take place during 2009, a calendar year in which the semiconductor market is predicted to sustain a considerable retrenchment.