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Mentor Graphics Grabs Chip Tools Maker

Ivy Lessner

Electronic design software vendor Mentor Graphics(MENT) 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), AMD(AMD) and STMicroelectronics(STM), Smith said.

Tools from the leading vendors -- Cadence Design Systems(CDNS), Synopsys(SNPS) and Magma Design Automation(LAVA) -- were two-and-a-half years late, and that forced chip designers to develop their own tools for the latest process technologies, he said.

"This is how Cadence got to be No. 1 in the inflection point" when the previous generation of EDA tools disrupted design methods in the late 1990s, Smith said. "Cadence attacked at both ends of the disruption. Mentor is attacking [using] both DFM and ESL."

Magma has been grabbing market share with its comparable tools for the newer process technologies, Smith said. And privately held software developer Pyxis Technology also sells some of the newer tools.

STMicroelectronics is already using tools from both Mentor and Sierra, according to the announcement. Philippe Magarshack, STMicro group vice president, was quoted as saying the company uses their tools "to address critical discontinuities that we identified in the design flow."