Cadence Design Systems Inc. (NASDAQ: CDNS) gained +1% on Monday morning, falling just over 60 cents short from its 52-week high set on March 15.

THE NEWS

The company announced its implementation of new systems in Yamaha’s mobile consumer chips to reduce power consumption by 10% while maintaining accuracy and providing easy access to engineers. The developer also advanced Yamaha’s turnaround time while increasing the hardware’s performance. Cadence also introduced a new version of its Incisive Enterprise Simulator product to improve low-power verification technology by 30%.

In April 2013, Cadence announced the acquisition of Tensilica, Inc. The $380 million purchase integrated another IP core firm to the electronic designer’s group. Tensilica, an already established chip manufacturer that has shipped over two billion cores brought in it flagship Xtensa build for microprocessor cores that can be customized. Tensilica has more than 200 million licenses and by the end of 2012 had only $30 million in cash.

Cadence is also set to expand its intellectual property division through the acquisition of Poland based firm Evatronix. The expansion would enhance Cadence marketplace in mobile cloud computing while adding a proven firm with a portfolio that includes USB 2.0/3.0 and MIPI. Evatronix has nearly 200 licensed USB controllers, the licensing of this deal remain highly complementary to Cadence. The acquisition will not have a negative impact on CNDS for the second quarter.

THE NUMBERS

From a quantitative perspective, the $3.96 billion market cap company has shown an average of 7.5 percent sales growth. The company brought in 2011 revenues of $1.15 billion compared to $935.95 million in 2010. For 2012 revenues were 15.36% higher at $1.33 billion. Despite being an electronics development company, CNDS also managed to incur conservative expenses related to research and development, growing at an average rate of 8% year over year. For net income, Cadence finished with $439.95 million for 2012, a significant upgrade from prior year’s $72.23 million.

EARNINGS SURPRISE

In late April, CDNS surprised analysts with Q1 2013 earnings of $0.21 per share, beating the consensus of $0.19 per share and topping $0.17 from previous year period. Since 2012 the company has steadily grown its EPS each quarter by $0.01 per share. Cadence will report its next earnings in July with estimation of earnings near $0.20. For the current year, CDNS is expected to bring in $1.5 billion in total revenues.

THE OUTLOOK

The stock currently trades at its 100-day moving average of 14.00 and has buy ratings from a majority of analysts.

MY TRADE

Selling the CDNS June 14-13 Put Spread for $0.25

Risk: $75 per 1 lot

Reward: $25 per 1 lot

Breakeven: $13.75

THE GREEKS

Delta: Long

Gamma: short

Theta: Long

Vega: Short