Cadence Design Systems (CDNS)

Cadence Design Systems (CDNS - Analyst Report) reported weak results for the second quarter, and blamed the shortfall on softness in EDA spending. We expect that a turnaround is going to take time due to mounting financial problems leading to a lackluster growth.

3Q and 2009 guidance was not encouraging. Although Cadence is offering new products and taking cost-cutting measures, we are not confident in the company's ability to grow and show healthy fundamentals over the near term. Cadence also withdrew its bid for Mentor Graphics in 2008, further dimming its growth prospects.

Cadence recently came out with enhanced versions of its products, but it will take time for these to generate additional revenue. 2011 estimates have been added. We maintain an Underperform rating on the shares a six-month price target of $4.50.