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Technology Stocks : Cadence Design Systems -- Ignore unavailable to you. Want to Upgrade?

To: Carl R. who wrote (484)	8/15/1999 7:17:00 PM
From: Ian@SI	Read Replies (1) \| Respond to of 668

Personally I think that because of the dominant market position and the low valuation, this company would be an ideal candidate for a takeover, but by whom? Good question. I doubt that any of the equipment makers would find any synergies; and there would be too many conflicts for a chip maker to do so. I don't know that there's a "CA" that would like to be all things to the chip designers. I guess we're just going to have to accept CDN for what it is; and buy or not buy it on its own merits. How do you rate it vs its competitors? Strengths? Weaknesses? Do you / did you also have SNPS? MENT? others? Thanks, Ian.

To: Carl R. who wrote (484)	8/15/1999 10:13:00 PM
From: orkrious	Read Replies (1) \| Respond to of 668

Their history is part of the reason that Wall Street has totally abandoned them right now. Hi Carl, I took a very small position in CDN a couple of weeks ago. I really didn't know anything about them, but my brother works for a very small software company in the EDA industry and he told me about them. The reason they have been crushed is because they changed their revenue recognition procedures. Apparently, when most companies in this industry make a sale, they are selling a license to use their EDA software for a specified period of time. The license agreement stipulates that payments be made on a monthly basis. The EDA companies turn around and sell their receivable (which is really an annuity) for a lump sum to finance companies. The entire lump sum payment is booked as income in the quarter the deal is signed (the software is usually shipped immediately). This is apparently accepted accounting treatment. The problem with this (beside the somewhat ethical one IMHO)is that it provides for somewhat "lumpy" sales. CDN wanted to make their revenue stream more predictable, so they bit the bullet and said that from here on out they will no longer book their sales according to this accounting method. You can see that this creates a problem for earnings over the next couple of years, since they still have to service all of those licenses they sold in the past but they are only booking new sales as the monthly license fees are booked. Since wall street looks forward, CDN's price should be near the bottom. All FWIW, Jay