Changing of the EDA Guards

Turnover among the heads at the major suppliers of electronics design-related software is rare indeed. Since 2010, the top spot of a leading PCB software company has changed hands only once.

The dean of PCB EDA, Makoto Kaneko, founded Zuken in 1976. Wally Rhines has run Mentor Graphics since 1993. His counterpart at Cadence, Lip Bu Tan, has been in place since 2009.

Altium has had three chiefs in its existence, the most recent being Aram Mirkazemi, who was installed in 2014. But for a shareholder revolt in 2012, however, Nick Martin, who founded the company in 1985, might still be in charge.

That’s why it’s was so unusual this week when, on the same day this week, Ansys and NI each named the successors to their respective thrones.

Ansys appointed Dr. Ajei S. Gopal CEO-in-waiting, succeeding longtime head Jim Cashman. Gopal’s been a familiar face around the company, however, having joined its board in 2011.

Cashman joined Ansys as president in 1999, and was named CEO a year later. On his watch, Ansys’s revenues have grown from $50 million to almost $1 billion.

In NI’s case, it’s in some ways an even bigger transition. As a researcher at the University of Texas, James Truchard cofounded National Instruments in his garage in 1976. Come Jan 1., when Alex Davern takes the reins, it will be as chief executive and president of a $1.2 billion firm employing more than 2,000 workers worldwide.  If Davern has an advantage, he’s held a variety of positions in finance at NI dating to 1997, and he’s been Cashman’s right-hand as COO and CFO since 2010.

What’s clear is that the software industry, while dependent on innovation, also prides itself on stability. Since the market is characterized by a relatively small number of major players, the ability to maintain relationships with key customers may have something to do with that. That the leadership at most of the aforementioned companies has been relatively controversy-free doesn’t hurt, either.

From the looks of it, the heir apparents promise more of the same. Given the respective performance of the CEOs they are following, that’s not a bad thing.



Icahn’s Next Move?

It comes as no surprise to this blog that Mentor Graphics is rejecting Carl Icahn’s offer to buy the company. After all, Mentor has in the past turned down bids that valued the company at roughly the same amount as did Icahn’s.

But there is a distinctly disengenuous flavor to Mentor’s reasoning. In a statement, the company insists that the company is worth more than Icahn is valuing it. Specifically, it claims, “Our share price has grown by more than 70% over the last year, for a two year aggregate growth of approximately 200%.”

True, that, but what the company fails to acknowledge is that Icahn’s accumulation of Mentor stock is likely the main driver behind the upswing. One year ago, Mentor’s stock was trading at under $8 a share. It’s now almost twice that. During that time, Icahn boosted his holdings from under 5% to almost 15% of the company. The combination of his large purchases and the inevitable ride on his coattails some speculative investors are taking has no doubt strongly influenced that jump in value. Despite a $125 million jump in revenue, Mentor has lost an cumulative $14.2 million over its past three fiscal years: to suggest investors are simply thrilled by its performance is a difficult assertion to prove.

The company also speaks of — but doesn’t elaborate on — regulatory risks that come with Icahn’s proposed buyout. It’s not clear why a sale to its largest shareholder, one who is tellingly not a competitor, would run afoul of SEC or other rules. 

The relationship between Mentor and Icahn has clearly soured. That was predictable: Few companies welcome Icahn’s type of shareholder “interest.” What’s less clear is what happens next. Will Icahn fold his flag and start selling? Or will he redouble his efforts to pressure the company into a sale?

New Leaders for Mentor?

It’s one thing when one high-profile corporate raider wants a piece of you. But three?

That’s the queasy situation Mentor finds itself in today. The company’s board, which fended off Cadence a couple years ago, is now fighting for its life, having incurred the ire of two of its major shareholder groups by switching the date of its annual meeting, thus making it difficult for the dissidents to propose their own slates of directors. And they aren’t the only ones who could make life difficult for the EDA software company.

It’s never good to be in the middle of a battle with shareholders whose funding and access to capital is several times greater than yours. It’s especially not good when you have lost a net $65 million over three years and are seen as a bountiful treasure chest that just needs unlocking.

For 18 years Wally Rhines has been a steady hand at the helm of Mentor. Sadly, it’s looking more and more likely he won’t make it to 19.