I have been thinking about Daniel Nenni's blog of November 21st, yes I know it has taken a while for all the neurons to fire, and I must say there are a few points I do not agree with. The title of the blog is "Mentor Acquires Magma?". To get to that story though you first have to read about how Magma is "the only EDA company" not preparing for the EDA360 message about the integration of software and semiconductor design. Unfortunately for Daniel, the EDA360 message is much deeper than just "pay attention to the software". The EDA360 core message is: pay attention to applications. Magma is doing that through analog IP and the integration of IP with the tools they license. So Magma is in their own way ahead of the game in that area, since neither of the big three has yet figured out how to integrate IP and tools under one license.

But back to the title of the blog. Daniel states that it would make sense for Mentor to acquire Magma because the Magma products would significantly improve its offerings in analog and mixed/signal and would remove a pesky competitor from the Calibre market. The scenario of how this would come to be, according to the blog is that Carl Icahn, who owns at least 15% of Mentor's stock, would use his remarkable negotiating skills to make the acquisition happen.

I have no idea why this would ever come to happen. First of all, there really isn't much constructive communications going on between Mentor's board and Carl. The reason is that Carl has not purchased a significant portion of Mentor in order to make it bigger: he want to make it smaller. Carl's portion of Mentor is worth around $200 million while the market capitalization of Magma is around $330 million. If Carl wanted to own a significant position of the merged company, he would have acquired Magma and then negotiated the merger. This would have been much more straight forward. As it is the Mentor situation is and will remain in the short term quite static. Carl and the Mentor board will stare each others in the eyes waiting for the right moment for the next move. For Carl, the moment for the next move is not now, and Mentor does not have the funds to make Carl go away.

The merger that would significantly annoy two or the big three is not Mentor/Magma, it is Cadence/Magma. Then Cadence would have clear control of a fast growing market (mixed/signals), and a leverage against Calibre even bigger than what it has presently.

But then why go outside of one's stock positions? Carl could sell Mentor's Embedded Software products to Cadence, thus beginning that slimming down process that is the reason for his interest in Mentor.