Am I the only one concerned that on the recent analysts call with Mentor Graphics, not once were the company’s printed circuit board design tools mentioned?
The conversation, both from the company and the analysts, revolved solely around the company’s semiconductor design and emulation product lines.
If analysts are focused only on the semi side, then that’s how they will value the company. And the company will orient its internal efforts to align with the analysts.
This bears watching.
After the IPC-2581 Consortium was founded to support the move from Gerber, it was only a matter of time before Mentor responded with a similar group to push its own format, ODB++.
Today, that measure was officially announced, with some 18 companies among the initial partners in what is being called the ODB++ Solutions Alliance.
Astute readers will notice many of the same companies are publicly supporting both formats. It will be interesting to see how that unfolds, given concerns by some of Mentor’s competitors about the advantage it gains with its hold on the ODB++ format.
It’s been a while since I updated readers on the IPC-2581 Consortium. Here’s a few tidbits:
Here’s a question: Should Mentor or Frontline (which Mentor owns a 50% stake in) join the IPC-2581 Consortium? Feel free to reply here or directly to me if you wish.
To understand why this is significant, we must go back to my IPC-D-350 days. Digital Equipment and the late, great Harry Parkinson were instrumental in trying to revive interest, and we at IPC also had support from several smaller software folks like Dino Ditta at Router Solutions and Steve Klare at Intercept Technology. But we never managed to break through, and a big part of the problem was the major CAD vendors’ collective refusal to offer IPC-D-350 as an output (or input). The response always was, “We’ll do it if our customers ask us.” But what they were really saying was, “We don’t want to make it easy for our customers to migrate their designs to a competitor’s tools.”
In the meantime, AT&T offered up RS-274X (aka extended Gerber), which UCamco continues to support, and Valor developed ODB++, and (like Gerber) while it was originally conceived as much a machine language as a format for electronic design data, it was accepted by fabricators desperate for something, anything, more intelligent than Gerber.
Under the leadership of Dieter Bergman, IPC also continued the fight, enlisting the help of the National Institute of Standard and Technology (NIST) through not one but two (GenCAM, Offspring) successors to IPC-D-350. (For a short history of the standards, click here.) Yet even now, after decades of trying, no group has been able to dismount Gerber from its perch, and it’s long past time we did. Data transfer formats are not something anyone ever will make money from, but every day we go without a better one, everyone will lose some.
Curiously, just a few weeks ago, I was contacted by David Gerber, son of H. Joseph Gerber, who invented the photoplotter and the eponymously named de facto standard that ran it. Gerber’s genius cut across many industries, from electronics to apparel, and he was awarded the 1994 National Medal of Technology for his life’s work.
For such an esteemed inventor, Gerber’s backstory is even more interesting than his career. As a teenager in 1940, he fled Nazi Germany for America. As an aeronautical engineering student at Rensselaer Polytechnic Institute, he discovered a way to reduce the time-consuming nature of graphing calculus problems using (seriously) an “expandable ruler” created from the elastic waistband of his pajamas. And of course, he formed The Gerber Scientific Instrument Co. in 1948, which is still going strong today.
The younger Gerber is writing a book about his father’s exploits. I look forward to learning more about the life of one of our industry’s true unsung heroes. But at the same time, I’m going to do everything I can to help retire one of his legacies.
In our cover story this month, Hemant Shah and Keith Felton of Cadence explain a new consortium taking root. The consortium is backed by a Who’s Who of OEMs and EDA vendors, including Harris, Ericsson, Fujitsu, nVidia, Sanmina-SCI, Cadence, Zuken, Adiva and Downstream Technologies. Its goal is to accelerate the adoption of IPC-2581 as an open, neutrally maintained global standard to encourage innovation, improve efficiency and reduce costs. The members are committed to adopting IPC-2581, which as I noted gives this latest effort a big leg up on all previous attempts.
Where does UP Media Group stand on this? For 20 years, we have supported the development of an intelligent, robust format for electronics data transfer. As such, we fully support the consortium’s effort to ensure a viable, supported and independent data transfer format that is driven by user needs.
That new task group attempting to update IPC-2581 recognizes that design needs will at some point “break” Gerber. Many of the players are new to the game, and a lot of the old rivalries appear to have died off due to retirements and, well, death. That’s good, because the industry needs a better standard than Gerber. Thanks in part to his son, Joseph Gerber’s name and many contributions will hopefully never be forgotten. But it’s time his namesake data format is.
The early sense is Carl Icahn will win two seats on Mentor’s board. Given there are eight seats total, and that Icahn and Casablanca Capital — another disgruntled shareholder that is supporting Icahn’s slate — between them own slightly more than 20% of the EDA company’s stock, that seems pretty fair.
Whether it will benefit the company in the long term remains to be seen, of course.
In the open letter, Mentor pointed to its improved revenues over the past few quarters, calling it proof that its strategy is working. That alone provides ample evidence the EDA company is headed in the right direction, although it remains to be seen whether Mentor boost sales profitably, which has been Icahn’s point all along.
In the letter, Mentor argues against what it calls Icahn’s desire for a “public sale.” “The linchpin of Icahn’s platform for his nominees continues to be a risky public sale process for [Mentor]. This public sale process might provide Icahn with liquidity, but has the potential for significant value destruction and could derail the business and financial momentum that Mentor Graphics currently enjoys,” the letter states.
Does Icahn want to be in the software development business? Of course not. And this is a polite way of saying so.
But more troubling is the company’s continued obsession with any alleged regulatory issues of a potential sale.
“It is clear that Icahn is simply continuing to ignore the regulatory obstacles and commercial risks to any transaction with Synopsys or Cadence, despite knowing that the analysis we recently performed shows that there are serious regulatory risks to any transaction with these two companies. He also continues to ignore the destruction of value through loss of customers and employees from any failed process to sell the company.”
Again, Mentor positions the only two logical buyers as Synopsys or Cadence, when in fact, they are perhaps the least logical buyers, for a multitude of reasons.
This line of argument is, at best, disingenuous*. As we’ve noted before, Cadence is heavily in debt and already made one failed play at Mentor, a move that helped cost then-CEO Mike Fister his job. Synopsys has shown little taste for PCB tools over the years and has made no indications it is at all interested now.
So who else would be potential buyers? In no particular order:
I’m looking at this only through the PCB lens, of course. But the universe of potential companies that could both afford and possibly desire Mentor in some shape or form is clearly much larger than two. While Rhines deserves the opportunity to continue to run Mentor without Icahn’s interference, it also would behoove Mentor to stop treating its shareholders as fools, as doing so undermines its rational — and strong — argument for the status quo.
*Disingenuous: not straightforward or candid; giving a false appearance of frankness; “an ambitious, disingenuous, philistine, and hypocritical operator, who…exemplified…the most disagreeable traits of his time”- David Cannadine; “a disingenuous excuse” (Source: Dictionary.com)
On May 12, the EDA company will hold its annual meeting, at which time shareholders either will affirm their faith in management by re-electing the current directors, or will try to grab gold via a different channel by voting in favor of dissident shareholder Carl Icahn’s alternate slate.
Icahn and some other investors have claimed, in no uncertain terms, that they feel Mentor spends too much money on itself and not enough flows back to the shareholders. They believe the design software company would be better off run by a group with a greater stake in the outcome — no current Mentor director holds more than a 0.5% share, while Icahn controls nearly 15%. “Over the past 19 years under current management, Mentor’s share price is down 18%, with zero return for shareholders,” Casablanca Capital, another dissident shareholder, wrote in a letter today. “How can we support a board that is responsible for this underperformance?”
For its part, Mentor today responded with its strongest rebuttal yet, saying that Icahn has no plan, short of selling the company, a move it says would jeopardize customer stability; overrates his own nominees’ qualifications; and distorts Mentor’s track record. Mentor further argues that its stock has beaten that of its main rivals over the past five years.
While the battle has been mostly confined to the boardroom — Mentor’s stock price hasn’t yo-yo’d much since Icahn made a $17 per share offer for the company in February — it’s hard to believe that the potential of new management hasn’t been an ongoing distraction to the company’s thousands of employees. They, too, are likely eager for some relief.
It also should be noted that the two investors that are calling for the board’s heads — Icahn and Casablana — own a little more than 20% of the company. The other 79%+ of voting stockholders have been quiet throughout this tennis match. They are the ones who will decide Mentor’s fate, however. At this point, the company is in their hands.