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Posts Tagged ‘Siemens’

EDA has not been successful at keeping its leaders

Wednesday, January 4th, 2017

Gabe Moretti, Senior Editor

I have often wondered why when a larger EDA company acquires a smaller one, the acquired CEO ends up, in a relatively short time, leaving and either joining a new start-up or a venture capital firm.  It seemed to me that that CEO thought enough of the buyer to predict his (or hers) employees and product(s) would prosper in the new environment when accepting to be acquired.  So, why leave?  It could just not be a matter of strong contrasting personalities.  I think I found the answer over the Christmas break.

I read the book “Skunk Works” by Ben R. Rich.  The book is a factual history of development projects that were carried out while Ben was first there as an employee and eventually its leader.  During his years at the Skunk Works Mr. Rich was part of the exceptional successes of the U-2 and SR-71 spy planes, and of the F117A stealth bomber.  All those projects were run independently of corporate overseers, used a comparatively small dedicated team, and modified the project when necessary to achieve the established goal.

Two major points made in the book apply both to the EDA industry and to industry in general.  First “Leaders are natural born: managers must be trained” and second “There is no substitute for astute managerial skill on any project”.

Many start-up CEOs are born leaders and do not fit well within an organization where projects are managed in a bureaucratic manner using a rigid reporting structure.  An ex-CEO will soon find such work environment counter-productive.  Successful projects need to react quickly to changing realities and parameters.  Often in the life of a project the team discovers new opportunities or new obstacles that come to light because of the work being done.  The time spent explaining and justifying the new alternative will impact the success of the project, especially if the value of the presented alternative is not fully understood by top executives or the new managers do not understand the new corporate politics.

I think that the best use of an acquired CEO is to allow him or her to continue to be an entrepreneur within the acquiring company.  This does not mean to use his talent to continue to lead the just acquired team. He can look for new opportunities within his area of expertise and possibly build a new team that will produce a new product.  In this way the acquiring company increases its ROI form the acquisition, even at the cost of increased compensation to both the CEO and his new team at the successful completion of their work.

In general Synopsys has managed to retain acquired CEOs, while Cadence has not.

The behavior in the EDA industry, with very few well known exceptions, has been to seek a quick reward through an acquisition that will satisfy financially both the venture capitalists and the original start-up team.  Once the acquisition price is monetized, many people leave the industry seeking to capitalize on their financial gains in other ways.  Thus the EDA industry must grow through the entrance of new people with new ideas but little if any experience in the industry.  The result is many academic brilliant ideas that result in failed start-ups.  Individuals with brilliant ideas are not usually good leaders or managers, and good managers do not generally possess the creativity to conceive a breakthrough product.

In its history the EDA industry has paid the price of creating both leaders and excellent managers, but has yet to find a way to retain them.  Of course there are a few exceptions, nothing is ever black and white, but the exceptions are few.  It will be interesting to see, after a couple of years, how Siemens will have handled the Mentor Graphics acquisition.  Will Mentor’s creativity improve?  Will the successful team remain?  Will they use the additional resource in an entrepreneurial manner, or either leave or adjust to a more relaxed big company life?

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.