Leading electronic design automation (EDA) company Synopsys Inc. (SNPS) recently closed the acquisition of VaST Systems Technology Corporation. This acquisition is expected to augment the company’s virtual prototyping solutions portfolio and cater to the automotive and consumer applications customer in a better way.
VaST Systems was founded in 1997 and is backed by Foundation Capital, Mohr Davidow Ventures and Allen & Buckeridge. With this acquisition, Synopsys gets access to the processor subsystem models generally found in automotive and consumer applications of the company’s prototyping portfolio. Virtualization is a key technology that helps to improve software development productivity and system verification.
Although this is a major acquisition by the company in recent times, the terms of the deal were not disclosed. We believe that it is not justified to expect a major revenue contribution from VaST in the coming quarter, as there will be integration issues that Synopsys needs to address.
Although Synopsys’s fourth quarter EPS of 33 cents beat the Zacks Consensus Estimate of 7 cents, revenue of $338.3 million tumbled 4.1% compared to the year ago quarter. The revenue decline can be attributed to the decline in both License revenue and Maintenance & Service revenue. The company has provided a decent guidance for the first quarter and fiscal year 2010 and expects revenue in the range of $325 million − $333 million, which we believe is achievable given the revival in demand for electronic goods.
For fiscal year 2010, the Zacks Consensus Estimate of Synopsys is $1.30, an increase of 1.3% from 2009 levels. Analysts appear to be continuing with their earlier numbers, as there has been no upward or downward revision in estimates in the last one month. The company has provided an average earnings surprise of 5.06% over the last four quarters and we believe that it might provide an earnings surprise in 2010 as Synopsys’s fiscal 2010 EPS guidance range of $1.52 − $1.62 exceeds the Zacks Consensus Estimate of $1.30.
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