Mentor Graphics Grabs Chip Tools Maker

Electronic design software vendor Mentor Graphics(MENT Quote) strengthened its position in the semiconductor tools market with its acquisition Monday of Sierra Design Automation, a developer of tools for 45- and 65-nanometer process.

Mentor, which develops design-for-manufacturing (DFM) tools, paid $90 million, half in cash and half in common stock, according to the company.

As a result of the acquisition, Wilsonville, Ore.-based Mentor lowered its EPS expectations, excluding items, by 2 cents, to a range of 6 cents to 8 cents for the second quarter.

In response, Mentor shares closed Monday down 15 cents, or 1.1%, to $13.46.

"Mentor is shooting for the No. 1 slot in EDA [electronic design automation]," said Gary Smith, an EDA consultant. Smith said the leading tools vendors are his clients, including Mentor Graphics and Magma Design Automation.

Acquiring Sierra gives Mentor resolution enhancement tools for system-on-chip designs, Smith said. At 65- and 45-nanometer processes, "way below the wavelength of light," the optics used to create chips need more correction. The previous process used rule-based DFM. As systems on chips get more complex while features get smaller, rule-based DFM becomes ineffective. "You have to simulate" designs using model-based DFM, he said.

These newer, "disruptive technology" tools such as DFM and electronic system level (ESL) design from both Mentor and Sierra will rearrange the deck among leading vendors of tools for semiconductor designers such as Intel(INTC Quote), AMD(AMD Quote) and STMicroelectronics(STM Quote), Smith said.