Synopsys recently announced they reached an agreement to acquire Magma. The natural questions are then “why”, and “is it a good thing”. Here are my two cents.
The “why” first. For Synopsys, I can think of a few good reasons:
- Magma’s Talus Vortex is still a disruption for many P&R Synopsys deals.
- Magma’s FineSim started to make a significant dent into Synopsys’ SPICE market share.
- Magma’s Titan is a viable solution against Cadence’s solution for analog and mixed signal design, unlike Synopsys’ in-house tool.
- Magma’s Tekton showed how Synopsys’ PrimeTime has been lacking innovations to bring distributed timing signoff to the customers.
For Magma, a good answer to “why “is a 30% premium on its stock price, which Rajeev Madhavan, the CEO of Magma, has been working very hard to push up. Also maybe Rajeev realized that Magma would never realize one of his ambitions, beating Synopsys at his own game, RTL synthesis. Or maybe he finally acknowledged that you cannot grow if you keep discounting your own products, and keep trimming talents for cost reasons. Regardless of the motivations, I am sure that Rajeev leaves with a good deal in his hands.
What about Magma’s employees? For them, the premium on the stock price is good news. But what will happen to their jobs is more of a mixed bag. In such acquisition, sales and marketing are the first to go. Synopsys will certainly retain the R&D talents they care about –FineSim, Titan, Tekton, and possibly a handful of people in the backend. I hear a lot of people in Magma India that wonder what will happen of them. Not to worry. I think it would be foolish for Synopsys not to leverage Magma’s R&D facilities in India. Both Noida and Bangalore’s Magma offices are made of strong, committed, talented people. They can easily be reassigned to other projects.
What about the users? Their reaction is likely to be negative. The reason: Magma out means less competition, thus less innovation and possibly higher prices. Also many users are reluctant to deal with Synopsys sales people that are often perceived as arrogant.
However Magma has been cutting down the price of its tools to a point that it has been hurting the EDA industry as a whole. Being aggressive on price to gain market share is good, but cutting down the price to stay in business is bad. Investing in new tools is good, but dispersing scares resources on too many projects results in unfocused strategies that fail to deliver. My take is that for the longer term, the disappearance of Magma will benefit the user as well.
What about the EDA industry? This is clearly good news. This consolidation is an opportunity for Synopsys to be ambitious. Also Magma’s acquisition will free talents, and will make some startups look like a decent alternative for the customers that want to balance Synopsys’ hold on the industry. Change is good. Thank you Magma for shaking the industry, and welcome to the future movers.