Yesterday afternoon, Cadence Design Systems said it plans to cut 12 per cent of its workforce - around 600 positions - and cancel deals with its consultants and contractors. Although the press release and 8K announcing the moves talks of focusing on particular areas, early indications are that the cuts have affected a broad swathe of departments.
The timing of the cutbacks suggests that this, unfortunately, is the first of two or more waves of job losses. As I understand it, this week is the last opportunity for Cadence to make the cuts and see the results fall in its final quarter of 2008. The company said it would complete the restructuring in the second half of 2009. It may be that later rounds will see certain groups being closed or sold off.
"In creating the restructuring plan, we emphasised those market segments where Cadence enjoys a leadership position, such as mixed-signal design, advanced verification and low-power design," Charlie Huang, who is acting as co-CEO for the moment, said in the statement.
The suggestion is that the era of the do-it-all Cadence has passed - the company will now step away from areas where it has failed to build up more than a minority position. The question is how deeply the company will ultimately cut. It's hard to see DFT and DFM remaining. What happens to PCB where the company has a solid if not remarkable share but has lost momentum? IC layout is not mentioned by name but that probably falls into what Huang referred to as low-power design.
Although these moves are clearly bad for a workforce that has seen its leaders stumble from one mess to another, there is a silver lining. If Cadence is not going to do it all, it signals a possible end to the suicidal all-you-can-eat deals its former management forged. If EDA companies go back to competing on the best tool for the job, it's probably the best way they can start to bring back the financial value they lost over the past few years.
I was talking to a Mentor executive yesterday before I heard that the layoffs had been announced and argued that EDA companies will probably stop issuing press releases about mega-deals with customers because the analysts will come to regard them as warning signs rather than good news.