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Siemens Acquisition of Mentor Graphics is Good for EDA

Tuesday, November 15th, 2016

Gabe Moretti, Senior Editor

Although Mentor has been the subject of take-over attempts in the past, the business specifics of the transactions have never been favorable to Mentor.  The acquisition by Siemens, instead, is a favorable occurrence for the third largest EDA company.  This time both companies obtain positive results from the affair.

Siemens acquires Mentor following the direction set forth in 2014 when its Vision 2020 was first discussed in public.  The 6 year plan describes steps the company should take to better position itself for the kind of world it envisions in 2020.

The Vision 2020 document calls for operational consolidation and optimization during the years 2016 and 2017.  It also selects three of its business division as critical to corporate growth.  It calls it the E-A-D system that include: Digitalization, Automation, and Electrification.

Although it is possible that Mentor technology and products may be strategic in Electrification, they are of significant importance in the other two areas: Digitalization and Automation.  Digitalization, for example, includes vehicle automation, including smart cars and vehicle to vehicle communication.  Mentor already has an important presence in the automotive industry and can help Siemens in the transition to state of the art car management by electronic systems to the innovation of new systems required by the self-driving automobile and the complete integration of the components into an intelligent systems including vehicle-to-vehicle communication.

Mentor also has experience in industrial robots and what is, in my mind, more remarkable, is that the PCB and cabling portions of Mentor, often minimized in an EDA industry dominated by the obsession of building ICs, are the parts that implement and integrate the systems in the products designed and built by third parties.

With its presence in the PCB and cabling markets, Mentor can bring additional customers to Siemens as well as insight in future marketing requirements and limitations that will serve extremely well in designing the next generation industrial robots.

Of course, Mentor will also find an increased internal market as other divisions of Siemens not part of the E-A-D triumvirate will utilize its products and services.

Siemens describes itself as an employee oriented company, so present Mentor employee should not have to fear aggressive cost cutting and consolidation.  Will Mentor change? Of course, it will adapt gradually to the new requirements and opportunities the Siemens environment will create and demand, but the key word is “gradually”.  Contrary to the acquisition of ARM by SoftBank, where the acquiring company had no previous activity in ARM’s business, Siemens has been active in EDA internally, both in its Research Lab and strong connections with university programs that originated a number of European EDA startups.  Siemens executives have an understanding of what EDA is all about and what it takes to be successful in EDA.  The result, I expect, is little interference and second guessing which translates in continuous success for Mentor for as long as they are capable of it.

Wil other EDA companies benefit from this acquisition? I tink they will.  First of all it attracts more attention to our industry by the financial community, but it also is likely to increase competition among the “big 3” forcing Cadence and Synopsys to focus more on key markets and while diversifying into related markets like optical, security, software development for example.  In addition I do not see the reason for an EDA company to enter into a business partnership with some of its customers to explore new revenue generating business models.