益華電腦 (CDNS) 2011 Q3 法說會逐字稿

Good afternoon.

My name is Marvin and I will be your conference operator today.

At this time, I would like to welcome everyone to the Cadence Design Systems third-quarter 2011 earnings conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, will be a question-and-answer session.

(Operator Instructions) I will now turn the call over to Alan Lindstrom, Director of Investor Relations for Cadence Design Systems.

Please go ahead.

Thank you, Marvin and welcome to our earnings conference call [for] the third quarter and fiscal year 2011.

The webcast of this call can be accessed through our website, www.cadence.com, and will be archived for 2 weeks.

With us today are Lip-Bu Tan, President and CEO of Cadence, and Senior Vice President and CFO, Geoff Ribar.

Please note that today's discussion will contain forward-looking statements and that our actual results may differ materially from those expectations.

For information on the factors that could cause the difference in our results, please refer to our -- Form 10K for the period ended July 1, 2011; our 10-Q for the period ended July 2, 2011; the Company's future filings with the Securities and Exchange Commission; and the cautionary statements regarding forward-looking statements in the earnings press release issued today.

In addition to financial results prepared in accordance with Generally Accepted Accounting Principles, or GAAP, we will use also present certain non-financial GAAP financial measures today.

Cadence management believes that in addition to using GAAP results in evaluating our business, it can also be useful to measure results using certain non-GAAP financial measures.

Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures with the most direct comparable GAAP financial results which can be found in the quarterly earnings section of the Investor Relations portion of our website.

A copy of today's press release dated October 26, 2011, for the quarter ended October 1, 2011, and related financial tables can also be found in the Investor Relations portion of our website.

Now, I will turn the call over to Lip-Bu.

Good afternoon, everyone.

Thank you for joining us.

The strong design activity so far in 2011 continued to drive our business in Q3.

Revenue totaled $292 million; non-GAAP operating margin was 18%; and we generated $52 million of operating cash flow.

Given the risk of the world economy, we look very closely at our prospective Q4 business.

As reflected in our outlook, we expect good demand in Q4 for our products and services driven by strong design activity.

Application-driven design, mobility, video and the cloud are key drivers of the design activities.

Also, many of our customers are targeting faster, smaller, lower-power devices for the mobile and consumer markets.

This is very well-aligned with our industry-leading position in low-power and mixed-signal design.

In addition to strong sales across our product lines, in Q3, we demonstrated our product readiness for 20-nanometer and firmly established our product capabilities for designing SoCs using advanced multi-core processors.

Let us look at our third-quarter highlights.

I will start with Silicon Realization.

The move to 32-nanometer and 28-nanometer is gaining momentum; Cadence is engaged with an increasing number of customers designing at these advanced nodes.

I will highlight a recent success later in my remarks.

We have already completed multiple test chips at 20-nanometer with our silicon partners and we have many more planned for Q4 and Q1.

We are also working on 14-nanometer projects with select partners.

Our recent announcement with ARM last week illustrates our readiness for 20-nanometer as well as highlights our capability for the design of SoCs using advanced processors like the ARM Cortex-A15.

Our engineers worked side-by-side with engineers from ARM and TSMC to design the first test chip in the world containing ARMs Cortex-A15, using a complete Cadence RTL-to-signoff design flow, and targeting TSMC's 20-nanometer process.

This shows that the ecosystem leaders are choosing Cadence to partner with them on their most advanced designs and the most advanced processors.

To address the increasing cost of mixed-signal design, we continue to leverage the recent productivity advances of Virtuoso 6.1 into our unified mixed-signal solution.

As a proof point, we recently announced that ST-Ericsson achieved a 10x productivity gain by using Cadence mixed-signal solution for a complex mixed-signal IC targeted to the high-volume mobile phone market.

Our customers are already benefiting from the integration of the recently acquired technologies from Altos and Azuro with our digital and custom/analog flows.

For example, TSMC is now making scripts for library characterization for TSMC's foundation IP available for download from TSMC Online.

For the first time, customers using the Altos library characterization product will be able to re-characterize the TSMC libraries with the same technology used by TSMC.

This provides customers greater visibility into the effects of noise, timing and power at every phase of design cycle, leading to higher-quality designs.

Now, let us look at SoC Realization.

Our primary focus for IP continues to be on memory and storage, and high-speed interfaces.

We have continued momentum in memory and storage IP and growing traction in hard PHYs.

The unique architectural advantages and greater flexibility of our PHYs led to several competitive wins.

For example, NuFront, a fabless semiconductor company based in China, chose our DDR hard PHY for use in a mobile application due to its power and area advantages.

In the area of high-speed connectivity, our PCI Express Gen 3 solution leads the industry.

The X8 version of the product is implemented in a new PMC-Sierra protocol controller, and during the quarter, we successfully demonstrated it with PMC-Sierra at several trade shows.

Cadence is the leader in Verification IP, which addresses the challenges of effective SoC and device integration, verification and standard interface compliance.

In Q3, we announced additional protocols and memory VIP that will accelerate the adoption of the emerging mobile standards.

Cadence now has support for over 30 complex protocols and a portfolio of memory models covering more than 6,000 memory devices.

In Q3, we closed several multi-million dollar contracts for VIP for both mainstream protocols and emerging ones.

Now let us turn to System Realization.

Customer demand is growing for our System Development Suite and its components, which tackle hardware-software co-design and co-verification.

The recently introduced FPGA-based Rapid Prototyping Platform, which enables and speeds up software development for complex systems, is generating good traction with customers, including LSI.

Q3 sales exceeded expectations for the cornerstone product in our System Development Suite, the Palladium XP Verification Computing Platform.

We had 9 new logos in Q3 for Palladium XP, of which 2 are competitive displacements.

LSI expanded their Palladium XP capacity by 50% and added capacity for prototyping with Cadence Rapid Prototyping Platform.

The latest generation Palladium XP systems will be used to accelerate the verification of LSI's storage products and Axxia multi-core solutions.

Palladium, along with the Rapid Prototyping Platform, enables software and hardware to be co-developed and co-verified prior to the availability of silicon, reducing the time needed to deliver solutions to LSI customers and greatly improving the quality of the delivered silicon.

Another customer purchasing Palladium XP in Q3 was AMD.

Since its introduction in mid-2020 -- 2010, sorry, 14 customers have placed significant repeat orders.

Finally, I want to highlight a success with an ecosystem partner.

Samsung and Cadence this week announced the results of a successful collaboration with Ambarella on their new 32-nanometer A7L high-definition media chip.

This chip will bring new levels of performance and power savings to digital lifestyle HD camera applications.

This success illustrates the value of close collaboration between industry leaders in bringing advanced products to market.

Now let me conclude my remarks with the following.

Q4 looks strong.

So far design activity and demand for EDA products are holding up.

Cadence is committed to technology leadership for both 20-nanometer and high-performance, low-power core-based designs.

Ecosystem leaders like ARM and TSMC are choosing to work with Cadence on their most advanced designs.

Customers are already benefiting from our acquisitions of Altos and Azuro.

We are successfully delivering high-value, differentiated Design IP and Verification IP to customers.

Demand for Palladium XP is strong, and interest is growing for the new components of the System Development Suite.

I will now turn it over to Geoff, who will review the financial results and provide outlook.

Thanks, Lip-Bu.

And good afternoon, everyone.

Cadence posted strong financial results for Q3 and we have good momentum going into Q4.

I will review the results for the third quarter and then present our outlook for Q4 and update 2011.

Total revenue for the third quarter was $292 million compared to $238 million for Q3 of 2010.

Product revenue was $164 million, maintenance revenue was $99 million, and services revenue was $29 million.

The revenue mix for the geographies was 44% for the Americas; 21% for EMEA; 18% for Japan; and 17% for Asia.

Total costs and expenses on a non-GAAP basis for Q3 were $240 million, compared to $235 million for Q2 of 2011.

Added costs from acquisitions and higher variable compensation contributed to the sequential increase.

Quarter-end headcount was approximately 4,700, up from approximately 4,600 for Q2.

Non-GAAP operating margin for Q3 was 18% compared to 9% for Q3 of 2010.

For Q3, we recorded GAAP net income per share of $0.10 compared to $0.48 per share for Q3 of 2010.

GAAP net income per share for Q3 of 2010 included a one-time benefit of $0.56 related to the settlement of an IRS examination.

For Q3 2011, non-GAAP net income per share was $0.14 compared to $0.04 for Q3 of 2010.

Operating cash flow for Q3 was $52 million.

Year-to-date operating cash flow is $178 million, compared to $142 million for the same period in 2010.

DSOs for Q3 decreased to 50 days, down one day from Q2.

Our target DSOs for the year is 50 days to 60 days.

The quality of receivables remained high, with less than 1% of receivables more than 90 days past due.

Capital expenditures for Q3 were approximately $6 million.

Cash and cash equivalents were $696 million at quarter end.

Approximately 40% of our cash is in the United States.

For Q3, 90% of orders booked were ratable including product, maintenance and services.

Weighted average contract life for Q3 was approximately 2.7 years.

On a weighted average basis, run rates on Q3 contract renewals increased.

I want to point out an item on our balance sheet that has changed this quarter.

Last quarter, the 2015 notes were classified as a current liability because the contingent conversion feature was triggered during Q2.

The contingent conversion feature was not triggered during Q3 so the notes have returned to the long-term liabilities section of the balance sheet.

The contingent conversion feature is triggered when the price of Cadence stock trades above $9.81 for an extended period during the last month of the quarter, and this was not the case for Q3.

Now let's address our outlook for the fourth quarter of 2011, and our update for fiscal 2011.

We are increasing our fiscal 2011 outlook for bookings, revenue and earnings per share due to strong Q3 results, the expectation of continued strong demand in Q4, and a positive impact of shorter contract [lives] on revenue.

For Q4 2011 we expect revenue to be in the range of $295 million to $305 million.

Q4 non-GAAP operating margin is expected to be in the range of 18% to 20%.

Non-GAAP total costs and expenses should be flat to up slightly compared to Q3.

GAAP EPS for the fourth quarter is expected to be in the range of $0.08 to $0.10.

Non-GAAP EPS for Q4 is expected in the range of $0.14 to $0.16.

Now for an update of fiscal 2011 outlook.

Bookings are now expected to be in the range of $1.135 billion to $1.155 billion, compared to the prior range of $1.115 billion to $1.145 billion.

We expect weighted average contract life in the range of 2.5 years to 2.7 years for the year, and to book at least 90% of our orders for the year under ratable arrangements.

We now expect revenue to be in the range of $1.135 billion to $1.145 billion for 2011, compared to a prior range of $1.115 billion to $1.135 billion.

Non-GAAP operating margin is expected to be in the range of 16% to 18% on an annual basis for 2011, compared to the prior range of 15% to 17%.

Non-GAAP and other income and expenses for 2011 is expected to be in the range of negative $16 million to negative $14 million.

For 2011, we are assuming a non-GAAP tax rate of 26% and weighted shares outstanding of 269 million to 273 million shares.

GAAP EPS for 2011 is expected to be in the range of $0.31 to $0.33, compared to the prior range of $0.20 to $0.26.

Non-GAAP EPS is now expected in the range of $0.48 to $0.50, compared to the prior range of $0.41 to $0.47.

We expect operating cash flow in the range of $230 million to $250 million.

We expect DSOs to be in the range of 50 days to 60 days at year end.

The prior range was 55 days to 65 days.

My long-term goal is to see DSOs approach 45 days.

Capital expenditures for 2011 are expected in the range of $30 million to $35 million.

So to conclude, Cadence again posted strong results as our operating profit continues to improve.

We are making consistent progress towards our long-term goal of a non-GAAP operating margin in the mid-20%.

While we have concerns about the risks of the world economy, at this point as we look at Q4, design activity and demand for our products and services remain strong.

Operator, we will now take questions.

(Operator Instructions) Paul Thomas, Bank of America.

Thanks for taking my questions.

First, Lip-Bu, you highlighted in your prepared remarks the strength that you've seen in smartphone and mobility, and I recall from the last call that you had talked about some difference in engagement, maybe you had seen, between mobility-based and PC and networking-based customers.

And I was just wondering now, 3 months later, can you give us an update?

Are you still seeing any difference between those 2?

Or is the strength you're seeing across the board?

I think we see strength across the board, Paul, and I think, clearly, the smartphone and tablets are gaining a lot of momentum.

Clearly, because of the application-driven design service opportunity because of application-driven solution and services that provide to the consumer, we see tremendous growth.

And PCs, a little bit of slow down and continue to be a little bit weak.

But, overall, I think we are really playing to our strengths as I mentioned in my prepared remarks that our partnership with ARM is very, very important and because, as you can tell, smartphones or tablets are not ARM-based.

And clearly I think the relationship we have, the partnership we have in terms of the technology agreement that we worked together, I think it's going to be significant [enough] for the license -- for some of the customers that's using ARM and core-base design.

That really drives a lot of our momentum.

Okay, maybe 1 more for you, Lip-Bu, here.

You're finishing the year very strong.

I was wondering if you could share some of your thoughts on what you think EDA growth or maybe semi R&D spending growth could be next year?

Do you think it's a mid-single-digit range number?

Or what is your sense at this point?

Yes, it's a very good question.

I think, overall, we look at the whole global economy, there, clearly, there's some risk in Europe and US, clearly impacted the semiconductor demand.

Clearly the growth is more the low-single digits to zero.

If you look at a lot of our customers, it is very much a mixed result and the clearly, as I mentioned, the smartphone/tablets are growing, cloud infrastructure are growing.

Meanwhile, saying that, the design activity remains strong.

And, so from Cadence point of view, we still see the momentum of design is still very strong, so I think to answer your question, the semiconductor R&D spending growth, I would say it's somewhere between 5% to 8% growth.

All right, thank you very much.

That's for 2011.

2012, we'll talk about in our next earnings call.

Rich Valera, Needham.

Thanks.

Good afternoon, gentlemen.

It looks like you had another real strong quarter in the emulation business, probably a [little] stronger than you expected.

Can you talk about the momentum in that business as you head into Q4?

What your expectations for that to be down in Q4 versus I guess very strong Q2 and Q3?

And, how do you feel about that in the face of the macro headwinds as we head into next year?

Sure.

Let me address first and then Geoff can chip in.

So, first of all, clearly we have the best-of-class, any complex chip below 40-nanometer has become a must-have because it really helps the time to market and also the hardware-software integration and also identified the [box] quicker.

That will really help in the time-to-market, so I think we continue to see demand and that's why I mentioned that we have a couple of new logos, 9 of them.

And then also, I think you're going to see more and more customers are using that and they come back for repeat orders.

And so, overall, we continue to see strength in terms of the design, quality application-driven design that requires that and we have the best-of-breed in terms of the products.

And then Geoff can talk to you more about our expectations for the second half.

Yes, so we don't break out the hardware business, Rich, as I think you are aware.

But I think as Lip-Bu highlighted, there's, clearly, is a secular trend here going driving that business.

We did say earlier we expected the business in the second half to be less than the first half of year, and that will be true although we don't guide specifics beyond that.

Okay, that's helpful, thank you.

And based on your prepared remarks, I don't think you've changed your strategy at all.

But in the wake of the departure of John Bruggeman, I guess shortly after your last call.

Just wanted to confirm that this EDA360 strategy was still firmly in place?

Just talk about that a bit?

Sure, happy to talk about that.

I think EDA360 is nothing magic to it; it's really the application-driven design, that is really the main theme of that.

And that is basically the hardware-software co-design, so in some ways, to look at the EDA360, we are very much executing to what's the plan that we have Silicon Realization that we continue to commit to the advanced node.

And then our success with ARM, and then continue building up our SoC Realization, besides the Denali acquisition, right now we are moving to expand our memory and storage IP and now move on into the high-speed connectivity.

And that's something that we are embarking very aggressively, executing that and then the third part is really the System Development Suite we already announced.

Now we announced a couple of new components like Rapid Prototyping Platform that we talked about and also the time to integration, the hardware-software co-designed, co-developed.

So I think, not just a question, actually we are executing beyond -- very laser-focused on executing our plan.

Great.

Just 1 final one if I could.

If you look back to last call and include what we talked about this call on a competitive front, it sounds like you have been gaining share on digital design, emulation and analog and mixed-signal design.

Are there any areas where you're not gaining share or you're not as strong?

How do -- are there any weak points in the portfolio that you feel like you want to improve and get more competitive in?

Yes, I think, let me address that.

First of all, we -- as I mentioned, our strength is across all product lines and we are happy with what we have, that strategy we set out to do.

Clearly, our digital has improved substantially.

I think the acquisition of Azuro is really welcomed by our customers, in terms of driving the power lower.

And also, I think, so far we move on, we want to be the leader in the 20-nanometer, we already announced with Samsung and TSMC and multiple customers engaging with us.

So we are committed and continue to win on that.

On the custom and analog, we continue to drive a differentiation and performance, 6.1 Virtuoso; the proliferation is great.

We like what we have; we continue to expand on it.

And then in terms of the SoC and the system level, as I mentioned, we are making great progress.

Palladium continues to be very strong and so I think overall, is there room for improvement?

Absolutely.

We continue to drive performance and the most important, provide the best solution to our customers to make them successful.

Great, thanks very much, gentlemen.

Raj Seth, Cowen & Company.

Hi, thanks very much.

Nice execution.

Lip-Bu, can I go back to the question around digital competitiveness?

You've announced last quarter a couple of deals with some top 10 guys.

There are a couple of companies, Ambarella the latest that you are very closely aligned with.

I think [Spedrum] is another one.

But you think you are relative to the competition?

Would you assert that you caught up at 2X node or is there still a meaningful amount?

I mean when you talked about still work to do across the portfolio but is there still a meaningful amount of work to do in digital to catch up, or do you think you're close at this point?

Thanks.

Good question.

We continue to drive success in our digital flow and I think we already mentioned a couple of them, I think, last week was a very important one.

It is ARM, at the 20-nanometer with the Cortex-A15.

We basically delivered the world's number 1, in terms of Cortex-A15.

That opened up tremendous opportunities for us in terms of customers using ARM, A15 and so this is really exciting for us.

So clearly, demonstrate that in our competitiveness, in terms of our digital flow and then I mentioned earlier, they are using the whole RTL-to-signoff design flow and that is very significant.

And the other part is we are also moving up into the leadership in the advanced nodes and that's critical because customers like to see the roadmap.

And then how can you support their design and then fabricate it at the foundries' partners by Samsung, TSMC, I mentioned in my remarks, I think that's very important for us.

And then beside that we continue to fine-tune and continue to -- most important is customer wins.

And I am a very strong believer of vertical collaboration and then providing customers with the highest performance, differentiating products in the marketplace to win.

Great, I wonder if I could ask 1 more and then a quick follow-up for Geoff.

Can you go back to the cycle?

I mean, there's lots of debate around the severity and duration of this semi cycle.

I understand that EDA feels good now but you've been around a long time and touched lots of folks in the semi industry.

I wonder if you could just reflect for a minute on what they're telling you and what your sense is on where we are in the broader semiconductor cycle, if you could?

Thanks.

It's a good question.

I just wanted to add to the last question that you asked.

I think the Azuro acquisition is very helpful for us and I think the integration is very good for us.

Back to your question about the semiconductor industry cycle -- clearly, in the last year, it was a very strong year.

This year's initially start with strong and then it's become a very mixed bag because of the world economy and slow down some of the economies like Europe and US.

Meanwhile, I think there's some -- a couple of drivers I mentioned in my remarks.

Clearly, the application design, mobility, video, cloud, are driving a lot of that design development, and we're very excited to be engaging with many of the successful companies and customers.

And so I think -- I don't have a crystal ball for next year but I think, clearly, from the -- we're very cautious because we look at the whole world economy.

And meanwhile, we are really delighted now that design activity still remains strong, but we're very cautious along the way and our work with our customers and then drive vertical collaboration, and that I consider is a formula for success.

Great.

A quick follow-up for Geoff if I might.

Geoff, I know you haven't ever really wanted to talk in specificity too far ahead.

You've talked about a 25% margin target without a date associated with that.

I'm wondering if, as you drive to -- I think you'd acknowledge you're probably somewhere below your normalized bookings level as you've come out of your reset, you're not full yet.

Can you talk to either, without timing, but the normalized bookings levels that you might anticipate or even normalized cash flow without getting into exactly when you expect to reach those?

Is there anything you can give us looking forward about where Cadence can head without getting too specific around 2012?

Sure.

And I want to clarify, we talked about mid-20% as far as our operating results.

Sure.

So first on bookings, we obviously can't give specifics and we'll give you a little bit more specifics when we talk about 2012 on our next call.

But we've consistently said that '11 was going to be better than '10 as far as bookings were concerned and '12 was going to be better than '11, just based on the rebuild cycle and the model transition.

That still stays in place.

Over time, I guess, we believe cash flow should closely reflect operating income with a little bit of an adjustment for depreciation and amortization.

So, I think if we get to the mid-20% on operating income, we should get to at least the mid-20% on cash flow.

And anything you can give on what you think the normalized levels are or what those levels are when you are through the transition, even if you don't want to get specific on exactly when we accomplished that?

Yes.

We've never given those results out or never given that information out.

And so, still, we'll wait to give you some more information when we talk about '12 but we're not specifically talking about normalized --

Last quick one, if I might.

Headed into Q1, anything seasonal to keep in mind as we put models together as it relates to OpEx that we should think about or no?

Yes, so seasonality in revenue is largely not part of our ratable model so we don't expect much seasonality in revenue.

We will have the traditional Q1 FICA and Social Security tax coming into expenses, offset by probably some other things, so generally, I think that would be the major swing item.

Okay.

Thank you.

Sterling Auty, JPMorgan.

Guys, it is Jack on here for Sterling.

Thanks for taking my questions.

Hi Geoff, with the converts going back into long-term liabilities, can you give us an update on what your intentions are with those, if they do trigger the exercise price again in the fourth quarter?

Yes, so generally when they trigger the exercise price, it still doesn't -- it's still not in the holder's economic interest to convert the market value if those converts are higher than then conversion price will do it.

So if it triggers at back in, we'll move them back into current, but it's really not something we think is an economic impact to the Company.

We do have the 2011 converts coming due later this quarter, which we'll pay off from cash flow.

Got it.

And then, on the raised guidance for fiscal '11, it sounds like you have the comfort tax actually take it up but you also called out some caution just given the global macro factor.

Can you talk about any assumptions that you have on bookings for run rate going into the fourth quarter?

And that's it from my side.

Thanks.

Yes, we don't give specific bookings guidance, but we've had said that we expect the duration to be 2.5 years to 2.7 years, again demonstrating the fact we also raised bookings guidance for the quarter -- or for the year.

It shows there, again, continued strength, I think, in bookings.

Great, thanks.

(Operator Instructions) Jay Vleeschhouwer, Griffin Securities.

Thanks.

Lip-Bu, could you talk about the segments or product areas where you are most rapidly building or rebuilding your R&D spending?

Yes, I think, Jay, first of all, I think across the board, the product we have continued to improve and drive competitiveness.

Clearly, we have a lot of commitments to the core EDA -- what that means is the digital flow, analog, mixed-signal and then all the way to packaging.

So that is our core business, we're very committed to that.

You can see the results of our success in a digital, mixed signal and continued all the way to the packaging side, the 3D IC and out SIP and I think we continued to drive that.

And then we are very prudently investing and also drive success in the SoC, that includes IP and differentiating IP and also the verification IP, the design IP and verification IP.

And also we continue to see the momentum and strength in the hardware emulation Palladium, and then we expanded that into the whole development suite and then move -- expand that whole area to Rapid Prototyping Platform, and also into the time to integration and then drive the hardware and software co-design, co-development.

So I think we pretty much [stick] to the investment into our EDA360 application driven synergy.

Thanks.

A couple of market questions.

1 about geography, 1 about product.

As you know, for most of the last decade, non-Japan/Asia has been the fastest growing region for EDA and on an as-reported basis, your share of that region spending for EDA is somewhat below your corporate or global average of EDA spending.

So perhaps that's because of, still, some transition issues in the model, but do you feel that there's improvement you ought to have in your share in what is still the fastest-growing part of the market geographically?

And on the product side, 1 major category in EDA that has been doing pretty well for the last year is printed circuit board.

And I think you categorize that in your System Interconnect.

Could you talk about what you are seeing in the market, the growth expectations or strategy that you have there to keep up with, again, one of the largest categories in the group?

Sure, I will talk about Asia and Lip-Bu will talk about the System Interconnect business to our PCB business.

So, I think I always caution everybody in EDA that the market number, market share numbers on an as reported basis is based on different business models that non-competitors have.

As you know well, Jay, we're in the middle of a transition to a fully ratable model and we've had some revenue that we had previously booked that -- upfront that we aren't booking yet as ratable.

I think some of our competitors use different models and so I think the numbers aren't fully compatible so we actually feel our share in Asia is doing quite well and probably growing.

So I think on the second part of the question, about PCB, clearly, I mentioned earlier that we are very unique in our -- in terms of not just digital and mixed-signal and analog; we're also -- all the way to packaging and then on the IC packaging and there's a 3-D IC packaging.

And we also have the PCB side and then the latest version of our Allegro PCB is focused on high-end, high-speed board design that we have been doing really good in terms of the well-received in the new products.

It brings new capabilities and features to drive some of the design costs down and so I think that had been very welcomed by our customer and I mentioned earlier about the whole 3-D IC that's gaining a lot of momentum.

We are heavily engaging with customers on that and we also introduced our OrCAD Marketplace that provided that online application for our OrCAD Product Line and that is more addressing a lot into China and some of this PCB opportunity.

And we also strengthened some of our distribution channel so that we can be effectively compete and win in the marketplace.

We seem to have no further questions at this time.

I would like to turn the call back over to Lip-Bu Tan, President and CEO of Cadence for closing remarks.

In closing, Q3 was another great quarter for Cadence and we have momentum going into Q4.

Our solutions are ready for 20-nanometer designs.

We have demonstrated product leadership in the design of SoC using advanced multi-core processors.

Our recent acquisitions are already benefiting customers.

Our key operating matrix are all improving.

Thank you everyone for joining us this afternoon.

We look forward to speaking with you soon.

This concludes today's conference call, you may now disconnect.