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Synopsys (SNPS) to Sell Software Integrity Business for $2.1B
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Synopsys, Inc. (SNPS - Free Report) , a leading provider of electronic design automation software solutions, has agreed to sell its Software Integrity Group business to two private equity firms — Clearlake Capital Group, L.P. and Francisco Partners — for as much as $2.1 billion in cash.
Per the agreement, Synopsys will get $1.5 billion upon the close of the transaction, another $125 million over the next five quarters and $475 million in cash payable upon achieving a specified rate of return. The transaction is anticipated to close in the second half of 2024, subject to customary closing conditions.
Upon completion of the transaction, the Software Integrity Group will operate as a newly independent entity led by its existing management team. Synopsys remains committed to ensuring a seamless transition for its team, customers and partners.
Shares of Synopsys have outperformed the Zacks Computer – Software industry in the year-to-date period (YTD). SNPS stock has risen 6% YTD, marginally higher than the Computer – Software industry’s growth of 5.4%.
The Software Integrity Group's suite of application security testing products addresses the evolving software risk landscape, particularly amid advancements in generative artificial intelligence (AI) technology.
Synopsys' decision to sell its Software Integrity Group underscores its strategic focus on accelerating core business strategies. The move aims to sharpen Synopsys' emphasis on silicon-to-systems strategies, highlighting the convergence of technology research and development in the AI-driven era.
By divesting its Software Integrity Group, Synopsys seeks to optimize its operational efficiency and allocate resources more effectively. This realignment enables the company to concentrate on advancing its core design automation and design intellectual property (“IP”) businesses, which are integral to its long-term growth and innovation objectives.
Moreover, the sale of the Software Integrity Group allows Synopsys to streamline its portfolio and prioritize investments in areas that offer the greatest potential for value creation. This transaction provides an opportunity for the Software Integrity Group to operate as an independent entity, led by its existing management team, under the ownership of Clearlake Capital Group, L.P. and Francisco Partners.
Conclusion
Synopsys' commitment to a seamless transition for its team, customers and partners underscores its dedication to maintaining strong relationships and ensuring continued success for all stakeholders. Overall, the decision to divest the Software Integrity Group aligns with Synopsys' strategic vision and positions the company for sustained growth and competitiveness in the dynamic technology landscape.
Additionally, Synopsys is benefiting from solid design wins due to a robust product portfolio. Growth in the hybrid working trend is driving demand for bandwidth. Strong traction for Synopsys’ Fusion Compiler product is boosting its top line. The growing demand for advanced technology, design, IP and security solutions is also creating solid prospects. The rising impact of artificial intelligence, 5G, the Internet of Things and big data is driving investments in new compute and machine learning architectures.
However, tightening the corporate budget amid ongoing macroeconomic challenges, along with unfavorable currency exchange rates and stiff competition, might hurt this Zacks Rank #4 (Sell) company’s near-term growth prospects. Geopolitical challenges and restrictions over trade with Huawei are other woes.
The Zacks Consensus Estimate for NVIDIA’s fiscal 2025 earnings has been revised 10 cents upward to $23.94 per share in the past 30 days, which suggests year-over-year growth of 84.7%. The long-term estimated earnings growth rate for the stock stands at 30.9%. The NVDA stock has soared 85.7% YTD.
The Zacks Consensus Estimate for Salesforce’s fiscal 2025 earnings has been revised upward by 3 cents to $9.71 per share in the past 60 days, which calls for an increase of 18.1% on a year-over-year basis. The long-term expected earnings growth rate for the stock is pegged at 17.4%. CRM shares have risen 4.8% YTD.
The consensus mark for Paycom’s 2024 earnings has been revised upward by 4 cents to $7.69 per share over the past seven days, which indicates a marginal 1% decrease from 2023. It has a long-term earnings growth expectation of 10.4%. The PAYC stock has declined 15.6% in the YTD period.
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Synopsys (SNPS) to Sell Software Integrity Business for $2.1B
Synopsys, Inc. (SNPS - Free Report) , a leading provider of electronic design automation software solutions, has agreed to sell its Software Integrity Group business to two private equity firms — Clearlake Capital Group, L.P. and Francisco Partners — for as much as $2.1 billion in cash.
Per the agreement, Synopsys will get $1.5 billion upon the close of the transaction, another $125 million over the next five quarters and $475 million in cash payable upon achieving a specified rate of return. The transaction is anticipated to close in the second half of 2024, subject to customary closing conditions.
Upon completion of the transaction, the Software Integrity Group will operate as a newly independent entity led by its existing management team. Synopsys remains committed to ensuring a seamless transition for its team, customers and partners.
Shares of Synopsys have outperformed the Zacks Computer – Software industry in the year-to-date period (YTD). SNPS stock has risen 6% YTD, marginally higher than the Computer – Software industry’s growth of 5.4%.
Synopsys, Inc. Price and Consensus
Synopsys, Inc. price-consensus-chart | Synopsys, Inc. Quote
Rationale Behind the Divestiture
The Software Integrity Group's suite of application security testing products addresses the evolving software risk landscape, particularly amid advancements in generative artificial intelligence (AI) technology.
Synopsys' decision to sell its Software Integrity Group underscores its strategic focus on accelerating core business strategies. The move aims to sharpen Synopsys' emphasis on silicon-to-systems strategies, highlighting the convergence of technology research and development in the AI-driven era.
By divesting its Software Integrity Group, Synopsys seeks to optimize its operational efficiency and allocate resources more effectively. This realignment enables the company to concentrate on advancing its core design automation and design intellectual property (“IP”) businesses, which are integral to its long-term growth and innovation objectives.
Moreover, the sale of the Software Integrity Group allows Synopsys to streamline its portfolio and prioritize investments in areas that offer the greatest potential for value creation. This transaction provides an opportunity for the Software Integrity Group to operate as an independent entity, led by its existing management team, under the ownership of Clearlake Capital Group, L.P. and Francisco Partners.
Conclusion
Synopsys' commitment to a seamless transition for its team, customers and partners underscores its dedication to maintaining strong relationships and ensuring continued success for all stakeholders. Overall, the decision to divest the Software Integrity Group aligns with Synopsys' strategic vision and positions the company for sustained growth and competitiveness in the dynamic technology landscape.
Additionally, Synopsys is benefiting from solid design wins due to a robust product portfolio. Growth in the hybrid working trend is driving demand for bandwidth. Strong traction for Synopsys’ Fusion Compiler product is boosting its top line. The growing demand for advanced technology, design, IP and security solutions is also creating solid prospects. The rising impact of artificial intelligence, 5G, the Internet of Things and big data is driving investments in new compute and machine learning architectures.
However, tightening the corporate budget amid ongoing macroeconomic challenges, along with unfavorable currency exchange rates and stiff competition, might hurt this Zacks Rank #4 (Sell) company’s near-term growth prospects. Geopolitical challenges and restrictions over trade with Huawei are other woes.
Stocks to Consider
Some better-ranked stocks in the broader technology sector are NVIDIA (NVDA - Free Report) , Salesforce (CRM - Free Report) and Paycom Software (PAYC - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for NVIDIA’s fiscal 2025 earnings has been revised 10 cents upward to $23.94 per share in the past 30 days, which suggests year-over-year growth of 84.7%. The long-term estimated earnings growth rate for the stock stands at 30.9%. The NVDA stock has soared 85.7% YTD.
The Zacks Consensus Estimate for Salesforce’s fiscal 2025 earnings has been revised upward by 3 cents to $9.71 per share in the past 60 days, which calls for an increase of 18.1% on a year-over-year basis. The long-term expected earnings growth rate for the stock is pegged at 17.4%. CRM shares have risen 4.8% YTD.
The consensus mark for Paycom’s 2024 earnings has been revised upward by 4 cents to $7.69 per share over the past seven days, which indicates a marginal 1% decrease from 2023. It has a long-term earnings growth expectation of 10.4%. The PAYC stock has declined 15.6% in the YTD period.