SAN FRANCISCO - Cadence Design Systems (CDNS) plummeted Thursday after the company said it would restate earnings reports for the first half of the year.
Shares tumbled $1.83, or 42.4%, to $2.49 in recent trading, after the company indefinitely delayed its third-quarter report Wednesday.
Cadence shares have come under a cloud because of the improper recognition of $24 million in revenue during the first quarter ended in March. That revenue should have been recognized "ratably" over the life of the contract beginning in the second quarter, the company said Wednesday.
Cadence, which develops software tools for the design of semiconductors, recently moved to a subscription-based revenue-recognition model used by its competitors. The move will make Cadence's revenue more consistent quarter to quarter, although it has the short-term effect of lowering revenue.The first-quarter revenue gaffe, though, points to the real trouble at Cadence: possible loss of market share to competitors. The revenue model change has contributed to an expected 30% drop in Cadence's year-over-year revenue in 2008, but probably does not fully account for it. The company has ceded the leadership position to Synopsys (SNPS). Synopsys, which uses a ratable revenue-recognition model, is expected to post a top line of $1.34 billion this fiscal year ending in October, a 10% increase over 2007. Synopsys is expected to report earnings in December. Shares were recently down 71 cents, or 4.2%, to $16.33. The iShares S&P Software Index (IGV), which includes Cadence, Synopsys and Mentor Graphics (MENT), was recently down 2.6%. Cadence is still slightly ahead of Mentor in market share. That company is expected to report 17.6% year-over-year top-line growth for the third quarter, although Mentor has twice fallen short of the Street's estimates this year. It is due to report earnings in November.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV