Cadence Design Systems (NASDAQ:CDNS), a leader in global electronic design innovation, and Denali Software, a leading provider of EDA software P, plan a merger under which Cadence will acquire privately-held Denali for $315 million from available cash.  Denali is expected to have approximately $45 million in cash at closing. In alignment with its EDA360 strategy, this transaction expands Cadence's solution portfolio to deliver cost-effective system component modeling and IP integration.

EDA360, which was unvelied at the recent DesignCon show, centers on three components:

1. System Realization -- the development of a complete hardware/software platform with all of the capabilities needed to begin applications development and deployment
2. SoC Realization -- the development of a single system on chip (SoC), including silicon IP and "bare-metal" software
3. Silicon Realization -- everything required to get a design into silicon, including the creation and integration of large digital, analog, and mixed-signal IP blocks

The merger is seen to accelerate the delivery of the solutions outlined in this vision:

• Denali's memory models provide system component modeling and verification capabilities required in System Realization.
• Denali's Design IP products enhance the Cadence Open Integration Platform required in SoC Realization.
• Denali's ease-of-use and well-established support of third-party simulators by its Verification IP (VIP), coupled with the focus on metric-driven and compliance management of Cadence's VIP, make this combination highly complementary and necessary for SoC Realization, and enable Cadence to expand its third-party simulation support.

Denali started out its existence by addressing an area which was skipped over by other EDA vendors: memory modeling.  Now, Denali dominates that sector of EDA and, most likely, it was a key factor why Cadence is buying Denali.

Another factor is that IP is being seen more and more as an EDA tool because it requires integration into the SoC.  Nevertheless, the move inches Cadence more in the direction of cometing somewhat with its customers.  The company's current posture is more aligned with competitior Synopsys whose EDA+IP strategy seemed to work well.

Years, earlier, Cadence tried to become the world's largest design house by opening more than a dozen design centers worldwide as way of boosting revenues.  That effort did not pan out and started the company's trouble's as the recession mercilessly punished those companies which were not positioned right.

With the Denali acquisition, Cadence will get an immediate $43 million annual sales boost.  Nevertheless, if Cadence wants to keep on its IP strategy, it will have to go out to acquire other IP firms  because Denali's focus is fairly narrow -- although very profitable for its niche.

As far as integration of the two companies, there synergies on the technical side but we see possible redundancy on the sales side.  We woule expect consolidation in the sales area and other selected overhead slots.

As DAC approaches, the attendees are simply asking: Will the swank Denali party which has become a tradition be a thing of the past?  If the DesignCon EDA360 introduction party is any indication it will be a splashy but more sophisticated version of Bollywood.

Contact:
Sanjay Srivastava, president and CEO, Denali Software, www.denali.com
Lip-Bu Tan, president and CEO, Cadence Design Systems, www.cadence.com