Time For Synopsys To Acquire PDF
PDF Solutions, (NASDAQ:PDFS), the leading provider of yield improvement technologies and services for IC manufacturing process life cycle, earlier in the year saw its stock crash to under a dollar per share.
Their Q1 revenues fell 26% sequentially and 50% over the year to reach $10.2 million. Gain share revenues saw a significant 55% fall over the year to $2.4 million and recorded a decline of 5% sequentially.
Net loss for the first fiscal quarter was $0.20 per share compared to a net loss of $0.02 per share a year ago.
The company is continuing to make advances in higher node technology and is hopefully looking at handling their scalability issue through tie-ups with other providers. Recently they collaborated with IBM to develop an IC design platform to mitigate the effects of escalating design and manufacturing process complexity at the 32-, 28-, and 22-nanometer dimensions. They hope to leverage IBM’s semiconductor design and process development expertise and their own pdBRIX™ IC design solution to provide efficient and cost-effective design templates to give designers more design flexibility and creativity at advanced process nodes.
They also announced a strategic tie-up with SVTC Technologies, a provider of technology development and commercialization services, to bring project-specific process optimization and yield enhancement services to their clients.
With Samsung Electronics they are tying up to further improve PDF Solutions’ YieldAware™ Fault Detection and Classification solution, which reduce process variability in Samsung’s fabs by controlling process tool health with models that predict the impact of tool sensor signals on final product yield.
PDF solutions is in a precarious state in an industry whose future seems bleak. Its stock price has recovered significantly to $2.40 after having crashed to a record low of $0.97 in March this year. With a market capitalization of just over $63 million, PDF Solutions might be a good company for any of the major EDA players to acquire. For the moment, my bet would be on Synopsys as the healthiest and the most desirable acquirer.
Hi Sramana,
Why not a foundry?
My feeling is that PDF is and always has been a services company, which does not meld well with the Synopsys product centric business strategy.
In regards to semiconductor yield, that is the foundries responsibility. The EDA DFM (yield) market failed miserably, customers look first to the foundries for yield help before engaging EDA companies.
Yield is also a competitive advantage for Foundries so the actual process information required to build commercial yield tools is tightly guarded. TSMC, the highest yielding semiconductor manufacturing company is not one of PDF’s customers for just that reason.
My blogs on yield and process variation are the most hit by search engines:
http://dnenni.wordpress.com/wp-admin/post.php?action=edit&post=804
http://dnenni.wordpress.com/wp-admin/post.php?action=edit&post=578
It is and will always be a very hot topic.
Cheers,
D.A.N.
The links in the comment above do not work. I would be interested in taking a look when they’re corrected.
In regards to TSMC not being a customer: My understanding is that TSMC demanded exclusivity terms that PDFS was not willing to give (think this was 2-3 years ago..). Given TSMC’s yield problems at 40nm, perhaps they’d take another look at PDFS. Or not. Who knows.
The idea of a foundry acquiring these guys makes sense at an intuitive level. However, since PDFS has a view “under the Kimono” of other big players (like Samsung), not sure whether any foundry could practically pull this off. An EDA acquirer might have an easier time making the case to their customers and the investment community.
One thing about PDFS that Sramana did not mention: While their market cap is 63M, they have about 39M (close to $1.50 per share) in cash. Equally important, the underlying business, on average, generates cash. If someone bought at these prices, they’re paying a net of 24M for the business.
For any value investors out there, look at the math when PDFS got down to about $1.00 per share. You could have bought the entire company for 2/3 the value of their cash in the bank! Put another way, someone could have bought PDFS for $1 per share, shut the whole thing down, and walked off with a 50% gain on their investment….in theory. The PDFS board probably wouldn’t consider selling at these levels, much less at <$2 per share.
My apologies:
http://danielnenni.com/2009/04/16/eda-marketing-fail-tsmc-process-variation/
That fact that PDF did NOT get acquired for cash in the banks says something I would say.
As I mentioned previously, secret process sauce is required for the DFM tools. Once PDF jumped in bed with IBM the market tunnel narrowed but the exit light went on: IBM Acquires PDF.
D.A.N.
Thanks Dan.
I just saw an EE times article mentioning (again) TSMC’s yield problems at 40nm and below. Made me think of your initial comment about TSMC being the highest yielding foundry. I am trying to figure out if PDFS being aligned with IBM’s “fab club” (and not with TSMC) has any relevance to recent articles indicating others might be catching up to TSMC at 40nm and below.
Link:
http://www.eetimes.com/news/latest/showArticle.jhtml;jsessionid=0BGGQ2LTZIYOYQSNDLPSKH0CJUNN2JVN?articleID=218102274
By the way, do you have an email address? I couldn’t find it on your site. Would be interesting in talking about this area. I am only superficially knowledgeable in this realm, and would appreciate any thoughts you’re willing to share.
I spend a lot of time with TSMC and will be in Taiwan again next week. Do not believe what you read in regards to yield, especially from an analyst.
You can get me on LinkedIn:
http://www.linkedin.com/in/danielnenni
or @ dnenni at yahoo dot com
Cheers,
D.A.N.
guess none of you guys work at PDFS, right?
Here is my blog from Taiwan:
http://danielnenni.com/2009/07/14/blogging-from-taiwan-tsmc-and-40nm-yield/
Next one is UNC 65nm yield
D.A.N.