Synopsys' Gold Standard Simulations Buyout To Boost EDA

Acquisitions have remained one of the key growth strategies of Synopsys Inc. (NASDAQ:SNPS) . Keeping with this trend, the company recently announced the buyout of Gold Standard Simulations Ltd. (GSS). Financial terms of the deal were, however, not disclosed.

The GSS website says that “[it] offers complete solutions for Design Technology Co-Optimisation (DTCO), PDK development and exploration and screening of future technology options”. It further states that “Gold Standard’s state-of-the-science accurate and predictive simulation and verification tools, that are based upon the breakthrough development and application of physical model methodologies, provide the shortest time-to-development, time-to-design and ultimately time-to-innovation”.

The recent acquisition is in line with Synopsys’ continued investments toward enhancing its electronic design automation (EDA) software product portfolio. Synopsys sells EDA software to the semiconductor and electronics industries. In the current economic scenario, customers are strengthening their supplier relationships while focusing on cost efficiencies, which have led many to select Synopsys as their primary EDA partner.

Acquisitions are central to the company’s growth strategy and give it access to newer markets and technologies. Some of its notable buyouts include Codenomicon, Coverity and Target Compiler Technologies.

Also, with intensifying competition making the EDA market tougher to penetrate, acquisitions have gone a long way in helping Synopsys accelerate top-line growth. In the first quarter of fiscal 2016, the company witnessed a 5% year-over-year increase in its revenues.

We believe that the company’s sustained focus on product launches, acquisitions and deal wins will drive results, going ahead. Apart from this, unique intellectual properties and global support provided by the company will boost its performance. Additionally, the company’s acquisitions will also expand its reach in the software quality, testing and security tools market.

However, competition from Cadence Design Systems Inc. (NASDAQ:CDNS) and Mentor Graphics Corp. (NASDAQ:MENT) , along with a challenging technology spending environment and uncertainty regarding the exact time of realizing acquisition synergies, keep us concerned.

Currently, Synopsys has a Zacks Rank #1 (Strong Buy). Another stock with the same Zacks Rank in the technology sector is Progress Software Corporation (NASDAQ:PRGS) .