The acquisition of Magma Design Automation by Synopsys was arguably the biggest story of the Electronic Design Automation (EDA) industry in 2011.  It will also most likely end up being the biggest EDA story of 2012 as well.

Most observers were stunned at the news, and not because it was an unlikely fit.  It’s actually a great fit and gives Synopsys a virtual stranglehold on the digital IC design market. It was improbable because of the deep-set enmity between the two companies, especially between the two CEOs, Aart DeGeus and Rajeev Madhavan.  Both companies launched multiple lawsuits against each other over the past decade claiming patent infringement on a variety of technologies, all of which have been resolved prior to the acquisition but left scars throughout both companies.  As one source that spent time as an employee in both companies said, “It was personal for some people and just business for others but it was pervasive.”

The acrimony between DeGeus and Madhavan often manifested publicly.  DeGeus would often be absent from CEO panels where Madhavan was present, and Magma employees and supporters made sure the industry noted that Madhavan was often not invited when the leadership of Cadence, Mentor Graphics and Synopsys were represented.

Madhavan also perennially accused Synopsys of deliberately undercutting prices in large package deals, a charge DeGeus vehemently denied, perennially.  To Synopsys’ defense, however, it was an unofficial industry-wide practice, according to Jeff Jussel, senior director of global technology marketing at element14.  Jussel is a former ASIC designer and EDA executive (including marketing director at Magma) and is leading element14′s push into embedded and electronic design services.

There was so much competition between the big four it drove a never ending spiral of ever cheaper prices.  Better results, better productivity, but less and less money for the developers of that technology.  The big guys could deal with it better because they had the big “all you can eat” deals.  1 million for one year, 3 million for two years, 4 million for five years.  The deals looked bigger, but the terms were getting longer and the price per seat was coming down.  It started killing the innovation in start-ups because there was so much pressure on margins that there was nothing left to buy from the start-ups, and the start-ups were getting pushed to the side by the deals,” said Jussel.  “The practice squeezed innovative start-ups out of the market because they couldn’t compete and be profitable.”

Synopsys bought many failed start-ups for the cost of assets alone, eliminating competition and gaining valuable technology with little investment.  As this practice continued industry wide, investors saw little upside in funding new start-ups and, at present, there is virtually no interest in funding new companies that have no chance of an IPO nor of being acquired for a premium over investment.  This is where the acquisition of Magma may have the greatest potential for energizing the moribund industry.

First, it consolidates the industry nicely.  Synopsys holds digital, Cadence leads in analog and mixed signal, and Mentor dominates embedded design.  The lawsuits and undercutting that decimated the start-ups will be a thing of the past.  Customers will have to pay what the vendors ask or be forced to build their own solutions…or look to start-ups. Which brings us to the second reason.

At $507 million, it is the single largest acquisition in the industry’s history, eclipsing Cadence’s acquisition of Cooper & Chyan Technologies for $428 million in 1997.  When combined with the Ansys purchase of Apache Design for more $310 million and a handful of other smaller deal this year it helps release nearly a billion dollars of cash into the pockets of investors and founders.  All of these deals will be concluded before the Design Automation Conference in San Francisco this July.  Conservatively, the industry could see $100 million of that invested in new technology before the end of 2012.

And who will be leading that charge?  None other than Rajeev Madhavan.

Madhavan could be called the single most successful entrepreneur in the EDA industry.    He was a founder of LogicVision, a company that was sucked up by Mentor Graphics for $13 million in Mentor stock. He founded Ambit to attack the Synopsys logic synthesis hegemony, using guerilla marketing techniques to grab market share and, in the end, sold out to Cadence for a quarter billion dollars.  Madhavan reinvested much of his take into founding Magma, which went from start up to IPO in short order.  Combined with the Ambit valuation, Madhavan-founded companies account for over $700 million in corporate value.  No other single entrepreneur has those kind of results in their resume.

The sale agreement precludes Magma or Synopsys representatives’ speculation on who stays and who goes.  There are those who hope Madhavan stays put for some time and he must make that commitment for the sake of the deal.  But no one believes that DeGeus will want his nemesis hanging around the office coffee bar any longer than is necessary, and he will have followers as he goes out the door.

“I expect Rajeev to be gone within days of the deal being done,” Jussel stated.

That is not to say there will be a mass exodus.  According to Jussel, Magma has “some of the most intelligent and best educated people in the industry who love creating technology for IC Design.  They’re working for the customers, not the logo.”  Those are the people that Synopsys want to keep, and they will be very generous to them.

DeGeus has stated that the talent of Magma was what was important to Synopsys, not the technology, so does that mean Magma’s tools are going away?  Jussel laughed at that question. “We’ll see how that works out.  The existing installed base loves the Magma tools so they will continue to support those product lines or lose the business altogether.”

But there will be business minds with wads of cash in their pockets that won’t be as welcome.  The doors of start-ups will be wide open for these people.  That is very good news for an industry that has limped along for much of the past two decades and whose lack of consistent innovation has held back the semiconductor industry as well.

 Was the Synopsys Magma deal good for the industry?  Tell us why at element14.com

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The site includes free, downloadable content of procedures, processes, flowcharts, and guidelines, as well as tools and resources for learning the basic disciplines of components engineering. The site also provides resources for both fundamental and advanced component-specific education.

Douglas Alexander, the founder and principle consultant, created this website to capture and increase the knowledge of experienced of CEs.  In addition to the current content, contributions of original white papers and other related document contributions are welcomed.

“After working in this field of electronics for over 30 years, and finding no website or book dedicated to this core discipline, I was determined to develop a site giving proper recognition to the community of engineers working behind the scenes at almost every manufacturing and engineering company known today.”

The title of components engineer has been around for many years, Alexander said. There is a vast body of knowledge and capability resident in those who, for various reasons, have not worked in their field for some time but are not ready to retire. “Experience and knowledge should not be retired even if you are. Now, here is where you keep it alive.”

Retired, semi-retired, and full-time CE professionals are welcome to submit their credentials, work-experience, and working locations on the site by email. Fees are confidential between the consultant and the clients.

“There is a catch,” Douglas explained, “The individual requesting a posting as a consultant, must demonstrate a competency level by submitting white papers and/or other CE specific documentation that will be reviewed by members of the site for acceptability.” These documents will be credited to the authors and will be reviewed by prospective clients to determination of the consultant’s applicable knowledge and ultimately “worthiness” for hire.

Alexander said the site is a collaborative effort and will fulfill its full purpose as the community grows with the individual contributions from experienced practitioners. “It is my sincere desire to provide an opportunity for those who want to consult in this special field of engineering to contribute to these pages and form or reestablish peer-to-peer relationships with others of like mind and spirit.”

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NewTechPress Editorial Director

The establishment of the smart grid is an inevitability, according to experts speaking at the Smart Power Grid Technology Conference, but depending on power utilities, government and “field of dreams marketing” will only delay it.  That’s why the latent industry needs the help of the electronic design community, according to speakers at the event put on by ISQED.

Edward Cazalet, CEO of the Cazalet Group, and Tom Tamarkin, CEO of EnergyCite, painted a picture, for 100+ design engineers at the fledgling conference, of an industry that is ready to spread nationwide save for public misunderstandings, governmental gridlock, and utility intransigence. Between the two presentations they offered a road map for the smart grid but that lacked a clear path to public acceptance.

“That’s why I’m here today,”  Cazalet concluded.  “We need your help to spread this word and identify how it can be done.”  Both entrepreneurs were looking for attendees to start looking into the potential of the smart grid for new product development, not unlike what came out of the PC industry in the 1980s.

Cazalet opened the conference with a description of the Transactive Energy Market Information Exchange (TeMIX). The exchange protocol makes it possible for energy providers and customers to buy and sell blocks of power at any time. That includes power utilities, power resellers and even customers with alternative energy systems that create more power than they need.  For example, an electric vehicle sitting in a garage after it reaches a full charge is essentially a block of power that can be utilized.  Offering that block on the exchange makes it possible for the car’s owner to sell that power to the grid.

“Any party can buy and sell power blocks to any other party,” Cazalet explained. “ Customer purchase blocks of power by subscription, paying extra if they use more than what they purchase or selling back what they don’t use.”

At present, however, that infrastructure is dependent on the connection of smart meters to the supplier’s power blocks and consuming devices.  While utilities have been under directive of federal and state governments to deploy these devices since as early as 2004, widespread distribution of the devices is still creeping along.

Tamarkin pointed out that the California Public Utilities Commission (CPUC) mandated the installation of smart meters by investor-owned utilities in 2004.  Southern California Edison (SCE) initiated form opposition that same year.  Tamarkin drafted and personally documents to prove the benefit to SCE in 2005, causing SCE to reverse it’s position formally and move forward on the initiative.

Tamarkin explained that the current method of billing rate payers is to provide a bill for what was consumed 90 days previous. Rate payers can only adjust their usage after the fact and hope that they are doing some good.  A completed smart grid, starting with smart meters, allows rate payers to see what their consumption is at any particular point and what they will have to pay for it.

Tamarkin likened the potential to the relationship between a car and the gas pump.  Once a consumer puts the nozzle into the tank and starts pumping, he knows exaclty what is going in the tank and how much it costs.  And the gas gauge in the car tells him exactly what his consumption rate is with some cars telling the driver if his milage is optimal.  With that knowledge and TeMIX in place, Cazalet said consumers would be able to purchase sufficient power for their needs on a just-in-time basis and utilities would better be able to predict where that energy should come from and how much to produce.

The problem, however, is the utilities have not shown much interest in completing the loop with the consuming, possibly because it doesn’t benefit them in the short run.  As Cazalet put it, “If it isn’t about generation or distribution, they don’t much care to talk about it.”

That has allowed the discussion to be directed by unknowledgeable consumer groups the base arguments against the technology on misrepresentation and isolated instances of bad installations.  For example, Joshua Hartnett , a vocal opponent of smart meter installation, based on supposed radiation issues, uses a blackberry phone that emits more radiation at Hartnett’s head than he would ever receive from a neighborhood full of smart meters. The fact that utilities and governments have been moving to correct the misrepresentations only in the past year has contributed to the lack of adoption.

Both Cazalet and Tamarkin asserted that once consumers have easy access to products that could tie into the smart grid, it would create a groundswell of demand and pressure on legislators, regulators and utilities.

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The Smart Power Grid Technology Conference (May 12 at the Santa Clara Biltmore, should be on a lot of calendars this coming May.  Smart grid tech is a major new industry that is receiving a lot of bad press from a lack of knowledge and the only way to overcome that is by educating ourselves.

In particular, the session on  ”The Transformation of Ratepayers into Customers” will be a significant piece of information. Tom Tamarkin, president of the Uttility Services Customer Link, will set out a definition for the term “smart meters” that takes into account the concerns of the public.

Additional topics include, “Enabling the Smart Connected Home,” and “the Role of Smart Lighting in the Smart Grid.”

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