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Synopsys Strengthens Emulation Biz

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Synopsys Inc. (SNPS - Free Report) recently completed the acquisition of EVE. The acquired company is a provider of emulation platforms for SoC verification.

The emulsion segment provides a range of technologies that are specifically used for verifying some of the complex systems on chips (SoCs) services. The acquisition enables the integration of Synopsys’ technologies such as simulation, debug and verification IP (VIP) with EVE’s technology. Eventually, Synopsys’s customers can avail of wider verification solutions. This is a new line of business for the company, which it wants to explore.

The company did not disclose the terms of the acquisition and does not expect it to contribute much to 2012 or 2013 results. Synopsys has for long been trying to tap this emulation technology and this is a nice opportunity for the company. EVE offers innovative emulation technology which is used by companies in semiconductor and electronic systems across the globe.

Strategic acquisitions have always been on Synopsys’ agenda to strengthen its product portfolio and promote growth. In August 2012, the company completed the acquisition of a privately-held electronic design automation (EDA) company, Ciranova.

The company largely works on delivering productivity improvements in custom integrated circuit (“IC”) design. Again in January 2012, the company completed the acquisition of a privately-held software maker ExpertIO Inc.

Acquisitions might be a prudent way of expanding the company inorganically. However, Synopsys needs to make bigger acquisitions to compensate for the modest growth rate in the industry. Also, the revenue contribution by the acquired companies remains uncertain as the industry is yet to pick up and generate additional business volume.

Although Synopsys is gaining traction from new products and acquisitions, we believe these might take a quarter to produce favorable results. Besides, the company is also facing competition from Cadence Design Systems (CDNS).

Synopsys currently has a Zacks #2 Rank (short-term Buy rating).

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