Subject: Carl Icahn accountability forced MENT to trade away Catapult C

> "Effective on August 31, 2011, the High Level Synthesis organization,
>  which produces Catapult C, will become part of a new entity with
>  Calypto Design Systems."
>
>      - from http://www.deepchip.com/wiretap/110825.html


From: Brett Cline <bcline=user domain=forteds got calm>

Hi, John,

I was intrigued by the recent announcement that Calypto was acquiring the
Catapult C group from Mentor.  

This is yet another example of how the big EDA companies like Mentor and
Cadence cannot afford to continue to give away products for very low prices
without taking a hit to their bottom line.  Mentor saw the Catapult C
business losing momentum to the point where the cost savings of moving
the employees off of the books to Calypto outweighed the revenue that the
Catapult C product was producing or would produce going forward.  Eventually
these companies have to answer to Wall Street (or Carl Icahn) and the
business choice becomes clear. 

What's curious is that we've been told by Simon and Shawn for years about
Catapult's incredible growth.  That, combined with market data from Wally's
DVCon 2011 keynote (http://www.deepchip.com/items/0488-06.html) doesn't
quite add up.

Wally spent time talking about how Verilog and VHDL were trending down
significantly and that the move to a high-level of abstraction was key;
especially to improve verification results.  So, if their Catapult C was
doing so well and the market indicators were pointing to ESL, why divest
the business?  (Please tell me, John, that you are not believing their line
that this "allows for more growth."  C'mon!)

> I must now note for a company that told us in DeepChip at every turn that
> "ANSI-C is all you'll ever need" and "SystemC is just low-level RTL",
> Mentor Graphics sure seems to have found religion very recently.  Even
> CatapultC announced a SystemC version some time last year -- though it
> seems to be struggling in the market.
>
>     - Brett Cline
>       Forte Design Systems                       Acton, MA


As I said before, the SystemC version of Catapult seems to be struggling in
the market.  I still stand by this comment because THIS IS WHAT CUSTOMERS
ARE TELLING US.  Their product just isn't there and even their flagship
customers are investigating alternatives at this point.

Of course Mentor will spin it so let's address their likely messaging.

We're going to hear "facts" about how this is now a complete flow which
gives them a bigger growth story because of more focus... but this is all
just hype.

The true story is that MENT had a more complete C flow of ModelSim for
simulation, Vista for debugging, and Precision for FPGA synthesis -- but
these products don't seem to be included in the Calypto transaction. 

BOUGHT BEFORE WITH INTERNAL MONOPOLY MONEY

As far as a bigger growth story -- OK, possibly.  Now the combined Calypto
group will not be able to hide behind the Monopoly money of internal
Flexible Access Model (FAM) negotiations.  (This is where the customer gets
the initial product allocation and remixes 3 months later to the products
that they really want.  Internally in MENT there's a big fight for who gets
the revenue recognition.  Of course, Joe Sawicki gets his take first and
the the rest fight for the remainder.)

Instead of this, my guess is that Calypto will want to attempt to sell
Catapult C for a real price so they can support a real business (perhaps
Cadence will want to try this also).

Everyone knows that most Catapult C customers pay between $30-50k / year
and clearly it isn't sustainable.  So, expect to see a price hike to be
market competitive and allow "for more growth."  I'm sure their existing
customers won't mind paying a ~5x the price next year.  [grin]

Before I move on, one comment on low pricing.  The "big guys" will try to
undercut the "little guys" with low prices to put us out of business.  If
you are a potential customer of one of these "extremely low priced products"
ask yourself this -- "can the company that is selling me this product
really build a sustainable business for this price?  And what happens when
the big guys decide it isn't financially viable any more and decide to cut
the product?"  I'm guessing the customers that bought Catapult are asking
themselves these questions right now.

THE NEW CATAPULT C SUPPORT NIGHTMARE

Regarding focus, this was particularly interesting to me.  Their press
release states:

    "Current customers of Mentor Graphics Catapult C Synthesis
     tool will continue to be supported by Mentor Graphics.  Moving
     forward, any new customer sales and support will be supplied
     by Calypto."

Huh?!?

Let me see if I understand this: Calypto now owns the product but, if you
bought from Mentor, Mentor will support you with a product _they don't own_.
Does this mean that Mentor is keeping all of the Catapult experts on staff
instead of sending them to Calypto?  Or, maybe Calypto will have all of the
Catapult experts and Mentor will have an army of Calibre FAEs to support
Catapult customers?  What if the customers wants bug fixes or enhancements?
Do they call Calypto or Mentor?  Maybe Mentor will just send you some magic
unicorn dust and all of your support problems will go away!

At the end of the day, their story just doesn't add up.

To be clear, Forte has partnered up with Calypto for a number of years and
they have built a good business.  Their new CEO, Doug Aitelli, has been
hitting his stride.  He's stated publicly that Calypto is committed to Forte
product integrations for our joint customers.  We respect him and his staff
that we have worked with for some time now. 

I want your readers to know that just because Cataput C has "issues", John,
the overall C/SystemC market is doing just fine.  Forte still has great
SystemC tools, we are growing, and we are hiring.  Anyone interested in
moving up to bigger and better things can give me a call.  (978) 206-1855

    - Brett Cline
      Forte Design Systems                       Acton, MA