Synopsys Ups Guidance, Rallies

Updated from May 19

Synopsys(SNPS Quote) reported stronger-than-expected second-quarter results after the close Wednesday. The company raised earnings guidance for the rest of the year, even as it said revenue could come in slightly lower than previously estimated, partially reflecting its decision to walk away from its Monolithic System(MOSY Quote) acquisition.

Investors responded to the post-close earnings report by pushing shares higher, recently by $2.23, or 8.8%, to $27.55.

"Synopsys continues to execute well in an improving spending environment," wrote D.A. Davidson & Son senior analyst Bill Frerichs, who has a buy rating on the stock. "Synopsys alone offers investors an attractive opportunity to go with the leader in the broad upturn now underway." (His firm has done investment banking with Synopsys.)

Needham analyst Rich Valera was slightly less upbeat, calling the quarter solid "though not perfect." He noted the company has been "seemingly reeling" from a weak first-quarter bookings performance, the break-up of the unpopular Monolithic deal and the departure of a couple of executives. But "we think the company's [fiscal second-quarter] earnings report, while not perfect, should help alleviate some of the deepest concerns surrounding Synopsys recently," wrote Valera, who maintained his buy rating. (His firm hasn't done banking with Synopsys.)

Under generally accepted accounting principles, Mountain View, Calif.-based Synopsys reported net income of $28.7 million, or 18 cents a share, in the second quarter. That compared to net income of $22.3 million, or 15 cents a share, in the same period a year earlier.

Excluding charges, the semiconductor design software maker said it earned pro forma net income of $57.1 million, or 35 cents a share, in the second quarter, compared to pro forma net income of $61.2 million, or 40 cents a share, a year earlier.

Revenue rose 1% to $294.6 million from $292 million a year earlier.