It is not too often that I am glad to admit I made a mistake, and this is one of those rare occasions. In the months preceding the annual stockholders meeting Mentor was locked in a proxy fight with its major stockholder Carl Ichan. it was clear to me that Mr. Ichan would succeed in his desire to have three new board members friendly with his own plans for Mentor's future. I predicted that once the three new members joined the board, a struggle for control would ensue and Wally Rhines would end up leaving the company.
The first part of the prediction came true, but then the scenario changed completely. To begin with the plan to break up the company by selling unprofitable business units hit reality. So with the exception of the HLS Catapult product, everything has remained in place. And the company has proven that it can be profitable in its present structure. So, I was wrong, and the fact that I was not alone in predicting the outcome does not mitigate the mistake.
On February 28 Mentor announced both its 4Q12 and its Fiscal 2012 results. The company reported revenues of $320.4 million, non-GAAP earnings per share of $0.58, and GAAP earnings per share of $0.52. For the full fiscal year, revenues were $1,014.6 million, non-GAAP earnings per share were $1.13, and GAAP earnings per share were $0.74.
Mentor's productivity has increased significantly. During the fiscal year Mentor grew its staffing by 1.4% its revenue increased by 10.9%. Cost of revenue was practically the same as the previous fiscal year, and operating expenses were only marginally higher.
From a segment point of view, Design to Silicon, the home of Calibre was the largest contributor to revenue. This is to be expected, since the move to 28nm and 20 nm requires design companies to upgrade the backend tools to fully implement double patterning and verify a much larger set of design rules than ever before.
The Scalable Verification business unit also showed increased revenue. Once again the reason is the need of more and better verification and implementation tools.
The Integrated Systems Design business unit, on the other hand, showed a slight decrease in revenue for the year. This likely due to increased competition in the PCB design and analysis markets combined with a lack of viable acquisition strategies. This business unit, in fact, had in the past few years, shown significant increase in revenue from acquisitions.
On a geographical breakdown, Mentor did well in the US, Europe and the Pac Rim, while showing a small decline in Japan. Cash flow, even if significantly less than that of Cadence and Synopsys, has improved and overall Mentor is in a much stronger financial position than in the previous year. Wall Street analysts predict a healthy fiscal 2013 for the company.