Thursday, June 10, 2010

Synopsys to buy Virage Logic for $315M

EE Times

SAN FRANCISCO—EDA and IP vendor Synopsys Inc. said Thursday (June 10) it signed a definitive agreement to acquire IP provider Virage Logic Inc. for $315 million in cash.

Synopsys (Mountain View, Calif.) said the acquisition of Virage (Fremont, Calif.) would complement its DesignWare interface and analog IP portfolio.

Last month, after issuing its quarterly earnings statement, Synopsys chairman and CEO Aart de Geus emphasized the success and growth of the company's IP business, which he said was approaching a $200 million annual run rate.

During a conference call to discuss the definitive agreement with Virage Thursday, de Geus called the pending deal a "natural fit" to management's strategic vision for Synopsys. He said Virage's product offering is "entirely complementary" to what Synopsys has today.

"Synopsys has built a high-quality IP business over the last decade, and many of our customers now rely on our commercial, off-the-shelf IP to save both cost and time to create their SoCs," de Geus said. "Virage products provide a perfect complement to the Synopsys Interface analog IP portfolio by adding embedded memories, standard cells and programmable cores for control and multimedia subsystems."

In physical IP, Virage is seen as a competitor to IP giant ARM Holdings plc and foundries Taiwan Semiconductor Manufacturing Co. Ltd. and United Microeletronics Corp. In memory IP, Virage competes with a range of players.

During the conference call Thursday, de Geus sought to downplay any potential competition with ARM, which partners with Synopsys in several programs. "ARM is one of our most important partners for the last 20 years.," he said. "It's a friend as a company. And it's a great company around which we have built many solutions."

Asked how Virage's 2009 acquisition of microprocessor IP vendor ARC International plc played into this dynamic, de Geus said the ARC products support ARM cores, essentially acting as a controller that can be used for sub tasks that can offload the main processor. "I think it will be interesting to see how we can build better solutions with ARM," de Geus said.

The Synopsys-Virage agreement comes about a month after No. 2 EDA vendor Cadence Design Systems Inc. announced a definitive agreement to buy memory IP vendor Denali Software Inc. for $315 million in cash.

In its most recent fiscal year, which closed in September 2009, Virage reported revenue of $47.4 million, down from $59.3 million a year earlier. In calendar 2009, Virage was ranked as the fifth largest IP vendor, with revenue of about $68.7 million, according to Gartner Inc.

But amid the sluggish economy, Virage has posted eight consecutive quarterly losses, with its last profit coming in the second quarter of fiscal 2008.

Deal to close by late October

Synopsys said under the terms of the agreement it will pay $12 for each Virage share. The deal is valued at about $289 million net of cash acquired, Synopsys said. The transaction is subject to regulatory and Virage Logic shareholder approval and other closing conditions, but the boards of directors of both companies have already approved the deal, Synopsys said.

After the closing, Virage will become part of Synopsys and Virage stock will cease trading, Synopsys said The transaction is expected to close in the fourth quarter of Synopsys' fiscal 2010, which closes Oct. 31, the company said.

Virage President and CEO Alex Shubat will join Synopsys as part of the deal, Synopsys said. Earlier this year, Shubat told EE Times that Virage is a company of big ambitions that no longer sees itself as just a provider of a collection of semiconductor IP cores, instead betting on a future of becoming a supplier of "subsystems" that can be quickly, painlessly and deeply embedded in SoCs for its licensees.

Virage would become the latest in a string of acquisitions in recent months by Synopsys, the top ranked EDA vendor by revenue. Recent deals by Synopsys include the February acquisitions of ESL software vendor CoWare, analog design software startup Gemini Design Automation and virtual system prototyping technology provider Vast Systems Technology Corp.

Virage has also made several prominent acquisitions in recent times. In August 2009, Virage acquired ARC in an all-cash transaction valuing the company at about $41 million on a fully-diluted basis. Also in 2009, Dutch chip company NXP BV agreed to transfer part of its advanced CMOS IP rights, 160 staff and certain engineering equipment to Virage.

In 2008, Virage acquired Impinj Inc.'s logic non-volatile memory IP business for $5.2 million. In 2007, Virage acquired Ingot Systems Inc., a provider of IP and design services to the semiconductor industry.


John Donovan gave some insight analysis regarding to this deal in his blog:

Synopsys Acquires Virage Logic

June 10, 2010 on 8:04 pm | In EDA | No Comments

By John Donovan—June 10, 2010

synopsys_logo_219x80Synopsys announced this morning that it had signed a definitive agreement to buy Virage Logic for $315M in what looks to be a mutually beneficial transaction. Synopsys needed to expand its semiconductor IP (SIP) IP offerings, and Virage Logic—having built out their portfolio and positioned themselves as a “trusted IP vendor”—needed the additional financial muscle and marketing channels that Synopsys brings to the table.

Synopsis has long been building up an IP portfolio to supplement its EDA tool offerings and now has the largest such portfolio of any EDA firm. Fifteen years ago Synopsys started out with interface IP. Last year they acquired MIPS’ Analog Business Group (ABG), adding an analog portfolio. Virage Logic, for its part, started out making SRAM instances and has expanded aggressively into other areas with their acquisitions of In-Chip Systems in 2002 (standard cell logic), Ingot Systems in 2007 (DDR memory controllers, PHYs, DLLs), Impinj in 2008 (their NVM technology) and ARC International in 2009 (configurable processors). Last November Virage added a missing analog/mixed-signal capability with their acquisition of NXP’s horizontal advanced CMOS semiconductor IP (SIP) technology.

Synopsys CEO Aart de Geus said in this morning’s conference call, “Virage products provide a perfect complement to the Synopsys Interface analog IP portfolio by adding embedded memories, standard cells and programmable cores for control and multimedia subsystems.” All that and then some.

Acquiring Virage’s IP libraries complements Synopsys’ emphasis on electronic system-level (ESL) design. Synopsys’ recent acquisition of CoWare, whose software is focused on ESL, works hand in hand with expanding their IP offerings. If you’re pushing system-level design, the more of the system you can provide the stronger your position. Synopsys, Mentor and Cadence are all taking different paths to the same place.

One possible glitch—won’t Virage’s ARC processor cores compete with those from ARM, long a close ally of Synopsys? Not according to either de Geus or John Koeter, Vice President of Marketing for Synopsys’ Solutions Group. Keoter: “The IP that we’re acquiring is really largely complementary to ARM. The ARC cores are really programmable cores, more for audio and video subsystems; they’re really ancillary processors to the ARM cores and not competitive with ARM on the CPU front.” Fair enough. ARC went toe to toe with ARM for years before retiring to those niches, albeit too late to survive.

Is IP a significant strategic growth initiative for Synopsys? According to Koeter, “Yes, it is. We view IP as a natural adjacency to the EDA market. It’s all about helping our customers get their complex chips out the door. As a corporate strategy we view IP as a growing adjacency to our core market. IP and systems represent about a $200M run rate for Synopsys, about 13% of the company. This is something that we’ve been investing in on both the IP and the systems side, and we view it as a nice growth opportunity.”

With EDA becoming a mature industry (read: flat or declining revenues off into the sunset), finding complementary revenue streams is key to survival; and doing so by acquisition during tough times is a fast track to growth. With the semiconductor IP (SIP) industry growing faster than either the semiconductor or EDA industries, this is an attractive area for expansion.

Expanding into IP from EDA makes sense for an equally basic reason: SoCs are becoming increasingly complex, requiring licensing IP from a variety of vendors. In the absence of totally uniform models—a core problem when it comes to analog IP—acquiring IP from a single vendor who can guarantee not only interoperability but compatibility throughout their tool chain is a compelling proposition. And the more IP you can offer the more attractive your tool chain becomes.

Expect to see other EDA companies snap up SIP vendors over the next several months.

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