It’s been rumored since last spring that Mike Fister’s resignation as CEO of Cadence Design Systems was imminent. What’s surprising isn’t that he finally stepped down. It’s more a question of why it took so long.

Most observers believed Fister would keep the top spot until just after the Design Automation Conference in June. Others thought it would happen when Cadence’s board found a suitable replacement—possibly even trying to lure former CEO Joe Costello back.

Neither of those scenarios proved accurate, at least partly because of Cadence’s bid for Mentor Graphics in June. That bid threw schedules completely off track, leaving many wondering why a company that was sliding—Cadence’s profit was down 92 percent in Q2 even though sales were only down 16 percent year over year—would bid for a company that was showing strong growth.

Most concluded it was a smokescreen. Maybe. It also might have been a delay tactic. Cadence withdrew its bid to acquire Mentor on Aug. 15, amid clamor by engineers that the merger would be bad for EDA.

Maybe Fister and his executive team truly believed they could turn things around and needed time. But given the huge number of empty office at Cadence, it was clear that the company was cutting positions to shore up its balance sheet without getting the kinds of returns it needed to boost sales. The problem with cutting staff is you can only make those kinds of cuts once. After that, there’s nothing left to cut.

This is rather evident in Cadence’s 2007 annual report. In the opening message, Fister said: “In 2007, we continued to execute on our strategy of providing increased value to our customers through enterprise-level solutions. I am pleased to report that we also executed well against our financial targets. We achieved revenue of $1.62 billion in 2007, an increase of 9 percent compared to 2006. Earnings per share increased to $1.01 from 46 cents as we achieved our operating margin targets while generating $402 million of operating cash flow.”

Notice the emphasis on operating margin targets versus profits. This is classic corporate spin. Any company doing well talks about profits right up front.

This isn’t to say Cadence is in trouble. From a technology standpoint, there is still plenty to brag about. But Fister was recruited by former CEO Ray Bingham because of his deep customer contacts at places like Intel, Fister’s previous employer. Fister is a very smart executive with extremely deep industry knowledge, but his track record at Intel now looks suspiciously like his record at Cadence.

The blame is partly Fister’s. He’s been charged with running the company, and it languished under his watch. But at least as much, if not more, of the blame should be put on the board of directors. It was obvious something should have been done months ago. Where were they?

What effect do you think this will have on the design world?

This entry was posted on Wednesday, October 15th, 2008 at 5:24 pm and is filed under Editorial, Opinion. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.