Mentor graphics reported its 2013 first quarter revenue on May 25th. The news is good, but unfortunately for Mentor its reporting followed by a few days Synopsys report, and the comparison is not favorable to Mentor. To be fair, we are talking about two companies that are now practically so different that any direct comparison is becoming artificial. But since most of the industry continues to be preoccupied by who is number two and who is number three, one must look at the numbers taking Synopsys under consideration. Synopsys is a much more efficient company than Mentor, but it is also clear that Mentor has made good strides toward improving its results.

Mentor's executives feel very confident about fiscal 2013 and have raised the guidance the company gives investors by predicting that they will realize earnings of $1.20 per share during the year on a GAAP basis, up $0.7 from the previous goal. The company had revenues of $247.9 million during its first quarter. The IC Design to Silicon, the Calibre family, is still the major revenue source (40%). This group also increased its contribution to the services revenue of the company.

Comparing this quarter with the corresponding quarter a year ago, we see that revenue increased by about $17 million, with Services and Support contributing almost half of it. But the cost of revenue remained practically the same since Services and Support costs went up, as one would expect.

A good control of expenses made it possible to practically double operating income and allowed Mentor to realize a $28 million net income. The company balance sheet tells a slightly different story. Total assets decreased by almost $21 million of which $12 million were cash and $8 million receivables. But liabilities also decreased, although I cannot explain why accrued payroll and related liabilities went from $112 million to $57 million (almost a 50% reduction).

My Questions

What I found most interesting and not reported in this press release was the change of Greg Hinckley title. I had always known Greg as Mentor's President and COO, but now he is listed as President and Chief Financial Officer. Since it is Greg that runs Mentor's operations, the change can only mean a significant increase to the way the company looks at its financial performance, I am sure because of Carl Icahn's "supervision". Mentor's executive team is composed of 22 people, none of them female by the way. Of these only seven have product development responsibility. An equivalent number have either Marketing, Sales, or local Organizational responsibilities at the corporate level. Since each of the product divisions have their own marketing and sales organization I find the Mentor matrix organization to be a bit top heavy.

By comparison, Synopsys's executive team has 13 members, two of whom are female, and six of whom have product development responsibilities. Synopsys also has no local organizational vice presidents, and Mentor has four Vice Presidents that have corporate sales responsibilities , versus just one at Synopsys. Either Joe Logan at Synopsys never sleeps or he is quite more efficient than the Mentor Four.