Synopsys Inc. SNPS recently announced the buyout of Elliptic Technologies, in keeping with its strategy of growing through acquisitions. Elliptic is a leading provider of security IP cores and software solutions that address a wide range of security requirements for applications including mobile, automotive, digital home, Internet of Things and cloud computing. However, the financial terms of the deal have not been disclosed.
The integration of Elliptic’s solutions will enable Synopsys to offer efficient silicon design and highest level of security which will protect connected devices from a wide range of threats such as theft, tampering, side-channel attacks, malware and data breaches. Moreover, through the acquisition Synopsys will gain Elliptic’s customers thereby boosting its top line.
Synopsys intends to integrate Elliptic’s products under its DesignWare IP portfolio. Under this portfolio, Synopsys provides a complete range of security IP solutions for identification, authentication, data encryption and content protection.
The recent acquisition is in line with the company’s continued investments toward enhancing the software security product portfolio. To strengthen its presence in the software security market, the company recently acquired Codenomicon Oy — a Finland-based global software security solution provider.
Moreover, in late May this year, Synopsys signed a definitive agreement to acquire certain assets of Quotium Technologies including the Quotium Seeker product and its R&D team. We believe all the aforementioned acquisitions will enhance Synopsys’ presence in the software security market while expanding the product portfolio and quality of its wholly owned subsidiary, Coverity.
Synopsys sells electronic design automation (EDA) software to the semiconductor and electronics industries. In the current economic scenario, customers are strengthening their supplier relationships and focusing on cost efficiencies, and many have selected Synopsys as their primary EDA partner.
Acquisitions are central to the company’s growth strategy and help it gain to access to newer markets and technologies. Some of its notable buyouts include Codenomicon, Coverity and Target Compiler Technologies.
Also, since intensifying competition is making the EDA market tougher to penetrate, acquisitions have helped Synopsys to boost revenues. The company recently reported second-quarter fiscal 2015 results wherein revenues witnessed a year-over-year increase of 7.6%.
We believe that the company’s sustained focus on product launches, acquisitions and deal wins will boost results, going ahead. Moreover, unique intellectual properties and global support provided by the company will likely drive its results. Additionally, the company’s acquisitions will expand its reach in the software quality, testing and security tools market.
However, competition from Cadence Design Systems Inc. CDNS and Mentor Graphics Corp. MENT coupled with a challenging technology spending environment and uncertainty regarding the exact time of realizing acquisition synergies keep us on the sidelines.
Currently, Synopsys has a Zacks Rank #3 (Hold). A better-ranked stock in the technology sector is Advent Software Inc. ADVS, sporting a Zacks Rank #1 (Strong Buy).
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