Synopsis, Inc.

700 East Middlefield Road
Mountain Valley, California 94043
U.S.A.
(415) 962-5000
Fax: (415) 965-8637

Public Company
Incorporated: 1986 as Optimal Solutions, Inc.
Employees: 590
Sales: $108 million
Stock Exchanges: NASDAQ
SICs: 7372 Prepackaged Software

Synopsis, Inc. is the leading developer of high-level design automation models and software for designers of integrated circuits and electronic systems. The company is perhaps best known for pioneering the commercial development of synthesis technology, which became the basis of the company’s high-level design methodology. Synopsis has subsidiary offices in continental Europe, Japan, and the Pacific Rim.

Beginning in the 1970s, electronic design automation (EDA) software became a key factor in the dramatic advances of the electronics industry. Increasingly complex integrated circuits (ICs) and electronic systems, coupled with a scarcity of qualified IC engineers, created a need for software that could reduce the time to market and product design and development costs, while facilitating the design of reliable, high-speed, high-density ICs.

EDA design methods changed rapidly, with three new generations of enabling technologies. The 1970s brought the first generation of EDA: computer-aided design (CAD). Computer-aided engineering (CAE) was the technology of the 1980s, representing an even greater improvement over the archaic, manual design methods. CAE made great progress in automating the design of complex integrated circuits, but engineers were still spending needless hours connecting the thousands of nodes (or gates) used on silicon chips. CAE could not keep up with the fast-paced changes of the electronics industry, and increasing circuit complexity led to an opening for a third generation design method in the 1980s. It was at the crossroads of the third generation of EDA technology that Synopsis emerged.

Aart de Geus, who led a work team at General Electric Microelectronics Center, developed a set of ideas for a new software technology called Synthesis. With Synthesis, engineers would be able to “write” the functionality of a circuit in computer language, rather than describing it in terms of individual gates. The software would automatically create the logic synthesis, saving design time and freeing engineers to focus on creative design solutions rather than manual implementation. Synthesis would create circuit designs from hardware languages (such as VHDL and, later, Verilog), supporting the new generation of EDA technology, hardware language design automation (HLDA).

In 1986, de Geus and several other engineers received support from General Electric and formed Optimal Solutions, Inc., dedicating themselves to the development of Synthesis software. After building the initial prototype, the company relocated to Mountain View, California, renaming itself Synopsis (SYNthesis Optimization SYstems). In 1987, EDA entrepreneur Harvey Jones became president and CEO of the company, leaving Daisy Systems, where he had been president, CEO, and co-founder.

From 1986 until 1990, the company focused on becoming “The Synthesis Company,” as well as on changing the methodology of modern electronic design. Synopsis quickly jumped to the forefront of top-down design companies, launching an era that would be defined by top-down design. In fact, Synopsis had virtually no competitors in the synthesis market.

Synopsis was successful in marketing its new synthesis technology by demonstrating improved circuit design quality through advances in timing optimization. Sales in the 1980s, and in fact throughout Synopsis’s history, demonstrated dramatic increases each year. In 1987, Synopsis’s revenues were $130,000. The next year, revenues rose by over 700 percent, to $976,000. An even more dramatic increase occurred in 1989, when revenues skyrocketed by another 700 percent, to $7.3 million. The company entered the 1990s with a 204 percent increase, ending the fiscal year 1990 with $22.1 million in revenues.

Recognition of the vital importance of hardware description languages (HDLs) led the company to broaden its focus in the 1990s. In 1990, Synopsis purchased a VHDL simulator from Zycad Corp. and introduced test synthesis products, anticipating the acceptance of VHDL as the computer language of choice. While other companies had used HDLs, including VHDL, before Synopsis entered the market, usage was primarily to meet Department of Defense documentation regulations. Synopsis offered the first synthesis technology that was well supported and marketed, spawning widespread reliance on HDL as a productivity tool. In 1991, Synopsis ended its fiscal year with a 55 percent increase in sales, and revenues of $40.5 million.

By 1992, Synopsis counted among its customers nine of the top ten computer makers, the top 25 semiconductor companies, and many other prominent businesses. Using synthesis, companies including NCR Corp. cut their custom-chip design time by 30 percent. Synopsis’s $50 million operation owned over 75 percent of the logic synthesis tools market, which was EDAs hottest growth area. In 1992 and 1993, Synopsis would introduce both design-for-test products and Design-Ware methodology for smart design reuse.

Although clearly the industry leader, Synopsis faced its first real competitive challenge in 1992. Vantage Analysis Systems, Inc., the leading VHDL simulator vendor, based in Fremont, California, organized an alliance with eight synthesis vendors. Vantage joined broad-based EDA suppliers including Mentor Graphics, Cadence Design Systems, Racal-Redac, and Viewlogic, who purchased synthesis technology in a joint effort to unseat Synopsis as the synthesis market leader. Although Synopsis no longer had a monopoly on the synthesis market, the company remained in control of over 50 percent.

Since capital budgets were loosening and only approximately five percent of electronics designers used HDLs at all in 1992, some companies looked to displace Synopsis. Cadence Design Systems and Mentor Graphics emerged as Synopsis’s primary competitors. Both companies possessed greater financial, technical, and marketing resources, as well as larger installed customer bases than Synopsis. Synopsis’s profits had fallen sharply, largely due to a five-fold increase in the cost of software license revenues (from $722,000 in fiscal 1990 to $3.6 million in fiscal 1991).

In 1992, Peter Schleider, an analyst with Wessels, Arnold & Henderson, predicted that Synopsis’s market share would fall to the 40 percent range, in an interview with Electronic Business. Amidst talk that the company might be bought by a larger competitor, Synopsis announced that it would go public in spring of 1992. Synopsis president Harvey Jones announced, in an interview with Electronic Business, “We have no interest in being a tool vendor in someone else’s strategy. We feel we can drive a paradigm shift all on our own.”

Three corporate shareholders sold stock in Synopsis’s 1992 initial public offering: Harris Corp., Sumitomo Corp., and Zycad. Synopsis was also backed by three venture capital firms, none of whom participated in the stock offering: Oak Hill Investment Partners, investment funds affiliated with Technology Venture Investors, and Merrill, Pickard, Anderson & Eyre IV. Synopsis announced the sale of two million shares of stock, at an initial selling price between $13 and $15 per share. The expected $19.6 million proceeds would be used for working capital and general corporate activity, including strategic acquisitions.

Also during the spring of 1992, Synopsis announced that it would link its suite of high level design tools with Mentor Graphics Corp.’s Falcon framework. This announcement was a surprise to Cadence Design Systems, whose executives had expected their own framework to be chosen for the linkage. According to Electronic News, Synopsis’s senior product marketing manager, Kevin J. Kranaen, attributed the selection of Mentor’s framework over Cadence’s to flaws in Cadence’s interface, “based on intermediate files with shallow integration.”

In June 1992, Synopsis introduced yet another breakthrough in synthesis technology: version 3.0 of its synthesis tools. The new tools further accelerated sequential timing of electric circuits, using a path-based timing verifier. Designers could take advantage of the new tools in applying synthesis to increasingly common multi-clock, multi-cycle, and multi-phase communications designs. In addition, timing-driven design of electronic circuits could be maintained throughout the design process. While other companies owned products capable of sequential design, Synopsis’s version 3.0 was the first product that could optimize sequentially in a timing-driven fashion, by manipulating data through a timing verifier.

In September 1992, Synopsis introduced Design Ware, a new product area that would facilitate the “smart re-use” of electronic designs through methodologies, tools, and libraries. Synopsis entered into a cooperative agreement with Texas Instruments and Comdisc Systems, using Design Ware to link TI’s custom digital signal processing (DSP) architectures to Comdisc’s Signal Processing Worksystem. To increase the quality of its customer support, in 1993 Synopsis introduced SOLV-IT!, a 24-hour customer service that combined the company’s complete design knowledge database with information retrieval technology.

Synopsis signed on as a supporter of a new initiative sponsored by Cadence in early 1993. The new effort, VHDL Initiative Toward ASIC Libraries (Vital), initially made Synopsis wary, when it seemed that Vital was focused on tying Verilog libraries into the VHDL language. Verilog, a competing hardware description language, was developed by a company that was later acquired by Cadence. Synopsis initially withdrew its support, not wanting to participate in the development of an initiative that could become competitive with its own products. However, it became apparent that support of Vital could promote Synopsis as a leading vendor and that, without Synopsis, Vital would not succeed. In January 1993, Synopsis announced that it would support Vital with technical expertise and experience in ASIC libraries for synthesis, simulation and test tools. This support was provided with the stipulation that the group must encourage the development of a VHDL ASIC library standard.

A new high-level design tool marked the expansion of Synopsis’s line of electronic designs in January 1993. The FPGA Compiler was introduced, featuring architecture-specific logic optimization and mapping and state machine optimization to increase performance of FPGA designs. FPGA represented a major growth area for Synopsis, as the complexity and performance requirements of the FPGA marketplace demanded more efficient design methodologies, and only ten to 20 percent of the people who could be using high-level FPGA design tools were actually using them.

Five years after its spinoff from General Electric Co., Synopsis held a 70 percent share of its chief market, specialized software to speed chip design. Synopsis’s HLDA software was used by almost every major chip designer, from Intel Corp. to NEC Corp., as well as by such computer makers as Apple, Sun Microsystems, and Sony. In fiscal 1992, Synopsis’s sales had skyrocketed, jumping by 56 percent to $63 million. Profits doubled, reaching $7.1 million, and Synopsis’s stock closed at 36 and one-half in January of 1993, 50 times its projected 1993 earnings.

One reason for Synopsis’s success in fiscal 1992 was a 73 percent increase over the previous year in international revenue. This growth was achieved through two major investments. First, Synopsis restructured its European offices. Continental Europe was emerging as a center of electronic design, and Synopsis established its European headquarters in Munich, Germany. The company continued to cover the continent with additional offices in France and England. This restructuring allowed Synopsis to secure important contracts in growth industries, including three of its top ten clients. Second, Synopsis acquired an 82 percent interest in its former Japanese distributor, Nihon Synopsis, in July 1992. Synopsis maintained Nihon Synopsis offices in Tokyo and Osaka, along with Asia/Pacific offices in Korea and Taiwan. Moreover, two of Synopsis’s top ten clients were located in Japan.

In March 1993, Synopsis filed a lawsuit against Cadence, charging misappropriation of trade secrets in connection with the new Leapfrog VIIDI simulator developed by Cadence. In a related complaint, Synopsis had filed suit against Seed Solutions, Inc., and its co-founders Paul M. Hubbard and Greg M. Ordy. Hubbard and Ordy served as employees of Zycad Corp. and Endot, a company acquired by Zycad, before founding Seed Solutions in 1988. From 1988 to 1990, they worked as consultants to Zycad in developing VIIDI simulation software. In 1990, Zycad sold the rights to simulation software to Synopsis. Synopsis claimed that Hubbard and Ordy had intentionally concealed information and misled Synopsis (and its Zycad subsidiary) about the best path for future software development. The day after Hubbard and Ordy’s contract with Synopsis/Zycad was terminated, in October 1990, Seed Solutions had distributed a detailed business plan for Seed Solutions’ “new” product: VIIDI simulation software which would compete directly with the software Synopsis had purchased from Zycad. In 1992, Cadence acquired the rights to Seed’s software, leading to the 1993 lawsuit.

In June 1993, Synopsis joined Sunrise Test Systems in the purchase of a failed company, ExperTest. ExperTest had been founded in 1988, and although its fiscal operations failed, its technological advancements were valuable. In the joint purchase of the automatic test pattern generation (ATPG) technology, both companies integrated the technology into their own design-for-test-product lines.

In November 1993, Synopsis expanded its VIIDI System Simulator (VSS) line, introducing the VSS Professional and the VSS Expert. These products would help system designers reduce the number of simulators used in design creation. Synopsis targeted the VIIDI simulation market as its fastest growing segment. Synopsis identified three factors behind the accelerating sales growth of its simulation products: the market momentum designating VHDL as an industry standard for high-level design, Synopsis’s ability to provide increased simulation speed and productivity for all phases of the design process, and the fact that Synopsis’s VHDL simulator was the first to achieve application-specific integrated circuit (ASIC) signoff.

Due to both the expansion of its technological focus and the success of its international business in the Japanese market, Synopsis crossed the $100 million mark in sales in fiscal year 1993, closing the year at $108 million (a 71 percent increase over the previous year). In addition, Synopsis almost doubled its cash position between 1992 and 1993.

Synopsis began the new year in 1994 with the acquisition of Logic Modeling, a company that marketed a library of software models for more than 12, 0000 commercially available ICs, as well as a line of hardware modeling systems. The acquisition was achieved in March through a stock swap with a value of $116 million and was structured as a pooling of interests. Logic Modeling was established as a “differentiated business unit” in Beaverton, Oregon. The relationship was structured as a ten-year partnership with the goal of bridging a developing gap between EDA tools and ASIC process technology.

Later in 1994, Synopsis continued to expand its design re-use operations, acquiring CADIS GmbH of Aachen, Germany, an innovative company specializing in digital signal processing (DSP) design. CADIS was acquired for approximately $4 million, in a strategic move to take Synopsis into the digital signal processing market with second generation technology.

In March 1994, Synopsis signed a marketing deal with Quick-turn Design Systems, allowing the companies to jointly design and market products and to provide each other with software to speed product integration. In 1994, Synopsis also began the process of selling its synthesis, VIIDI, simulation, test, and design re-use software and services to Texas Instruments. Another connection was strengthened when Synopsis made it possible for users of Altera’s programmable logic devices (PLDs) to use Synopsis’s DesignWare and VIIDI System Simulator (VSS). The companies had been working closely together since 1991, with more than 100 mutual clients, but only in 1994 could Altera users perform timing-driven synthesis by specifying clock frequencies and path delays using Synopsis’s automation tools.

In what was referred to as the “Blockbuster Video approach to design tools” (by Bill Hood, a program manager at Locklead Sanders), Synopsis lent its expertise to a new plan to rent software over the Internet in April 1994. The rental idea was developed to appeal to military contractors who often needed additional capacity during some phases of a project, but for whom purchase of software would be inefficient in the long-term.

Other new developments in 1994 included the announcement of Behavioral Compiler, a synthesis tool that simplified IC design by cutting specification time by five to ten times, allowing designers to use a higher level of programming and facilitating modification and reuse. For the first time, Synopsis announced that bus interface would become available in DesignWare, a kit that can be configured and synthesized into an ASIC design, through an agreement with Intel Corporation to offer Peripheral Component Interconnect (PCI) Local Bus solutions for the systems market.

In the mid-1990s, Synopsis was intent upon establishing itself as a leader in its three technological areas: synthesis, simulation, and test. The company’s HLDA tools were marketed to a worldwide network of key accounts and were widely used on UNIX workstations, including Sun Microsystems, Hewlett-Packard, IBM, Digital Equipment Corporation, Solbourne, MIPS, and Sony. Synopsis provided customer service, training, and support as a component of its HLDA offerings. Synopsis had license agreements with over 250 customers, including the world’s leading semiconductor, computer, communications, and military and aerospace companies. In addition, Synopsis had invested in developing and maintaining cooperative market development relationships with leading semiconductor vendors worldwide. As electronics technology continued to experience fastpaced advances in the 1990s, Synopsis expected to continue doing what it does best—creating and marketing solutions that allow engineers to maximize their creative time while taking advantage of the latest technology.

Principal Subsidiaries

Synopsis GMBH; Synopsis (Northern Europe) Ltd.; Synopsis SARL; Nihon Synopsis K.K.; Synopsis Korea, Inc.; Synopsis International, Inc.; Synopsis Technology, Inc.

Synopsis, Inc.

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Synopsis, Inc.

700 East Middlefield Road
Mountain Valley, California 94043
U.S.A.
(415) 962-5000
Fax: (415) 965-8637

Public Company
Incorporated: 1986 as Optimal Solutions, Inc.
Employees: 590
Sales: $108 million
Stock Exchanges: NASDAQ
SICs: 7372 Prepackaged Software

Principal Subsidiaries

Synopsis GMBH; Synopsis (Northern Europe) Ltd.; Synopsis SARL; Nihon Synopsis K.K.; Synopsis Korea, Inc.; Synopsis International, Inc.; Synopsis Technology, Inc.