DJ Avant Tells Wall Street It Can Handle Cadence Fine
02 Aug 20:05
By Pat Maio
Of DOW JONES NEWSWIRES
LOS ANGELES (Dow Jones)--Software maker Avant Corp. (AVNT) made its case to
Wall Street Thursday that it can recover from a $195.4 million restitution fine
it was ordered to pay rival Cadence Design Systems Inc. (CDN) for stealing
trade secrets.
Avant said it was looking to dispel misconceptions that arose, in part, from
the Cadence matter, but it was also seeking to begin rebuilding confidence in
the tarnished company.
Paul Lo, who was Avant's chief operating officer until July when he was named
as president to replace ailing Gerald Hsu, apologized on a conference call to
Cadence, shareholders and others for the events that led to the dispute. The
dispute first erupted in 1995 when former Cadence employees who came to work at
Avant were alleged to have stolen trade secrets.
Lo brushed aside questions that the company is losing key personnel because
of the turmoil caused by the legal battle and that it doesn't have sufficient
cash to pay the remaining fine to Cadence.
"The purpose of the call was to try and dispel misconceptions that we were
losing customers and employees," said Clayton Parker, Avant's general counsel,
in an interview.
Parker said Avant has sufficient cash to pay the remaining $55 million
balance on the $195.4 million restitution fine owed to Cadence. The company
already paid $100 million last week, and wired $40 million on Wednesday.
"Assuming Cadence continues to be cooperative and we can reach agreement on
the terms by Jan. 15, 2002, we don't believe we will need any financing. That
payment can be paid easily," Parker said.
"That isn't to say we won't seek additional financing to pay Cadence sooner,"
he added. "We prefer not have our largest competitor also be our creditor."
Jennifer Jordan, an analyst with Wells Fargo Van Kasper, in Portland, Ore.,
said, "The restitution fine and remaining payment is almost a non-issue."
She estimates that the Fremont, Calif.-based software firm will generate
about $58 million in cash through the end of the year, giving it slightly more
than the $55 million that it still owes Cadence. The issue is whether Avant can
find another way to come up the balance rather than take the cash out of its
own pockets, she said.
Lo also said on the call that the employee turnover rate at Avant isn't
nearly as severe as some analysts and competitors have painted.
Of 264 Avant employees identified as key workers in the past six months, Lo
said only six have left the company, or 2.3%. "The turnover rate has remained
very low,' Lo said.
In looking at the company's 1,500 workers over the past six months, Lo said
the turnover rate has barely been measurable given that the sour economy has
helped it retain workers. Last year, dot-com's recruited many of its employees
when the economy was healthy.
The trade secret case has led to six current and former Avant executives
receiving jail terms and probation.
A Superior Court judge in Santa Clara County, Calif., ruled last week that
Avant employees stole source code for routing software from their former
employer Cadence. The executives were ordered to pay more than $8 million in
fines. A separate civil case based on the same trade secret allegations is
pending between the two companies.
"We will vigorously defend ourselves in the civil trial," Parker said.
Shares of Avant closed Thursday at $5.96, up 42 cents, or 7.6%.
-By Pat Maio, Dow Jones Newswires; 323-658-3776; patrick.maio@dowjones.com
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