Synopsys Agrees to Buy Rival Chip Design Software Firm

Synopsys Inc. on Monday agreed to buy Numerical Technologies Inc. for $250 million to fill an important gap in its product line.

Synopsys, the world’s second-largest maker of computer chip design software, will pay $7 a share, 89% more than Numerical’s closing price Friday of $3.70. The purchase will cut Synopsys’ fiscal 2003 profit before goodwill by less than 10 cents a share and will add to profit in fiscal 2004, the company said.

Synopsys, mounting a challenge to larger rival Cadence Design Systems Inc., wants to sell products for each stage of chip design. Last year, Synopsys spent $835 million buying Avanti Corp. and two smaller companies. Numerical’s software links the early and late design phases, helping customers make smaller, cheaper chips.

“The world is evolving toward a fully integrated solution and the company that gets there first is going to be the one that gets the most market share,” Synopsys Chief Financial Officer Steven Shevick said.

Cadence has a licensing agreement with Numerical that ends next month, Numerical interim Chief Executive Narendra Gupta said. Synopsys’ chief executive, Aart de Geus, said the company is willing to discuss future licenses with Cadence.

Numerical shares fell 90% last year as sales declined and its president and CEO resigned in December. The company has lost money in each quarter since selling shares to the public in April 2000. It had a net loss of $1.9 million on sales of $11.4 million in the quarter ended Sept. 30.

Synopsys had a net loss of $200 million on sales of $906.5 million in its fiscal year ended Oct. 30.

Shares of Mountain View-based Synopsys fell $1.50 to $41.77. They had declined 23% in the last year. Numerical, based in San Jose, rose $3.21, or 87%, to $6.91. Both stocks trade on Nasdaq.

Making semiconductors is getting more expensive as chips get smaller, De Geus said. Chip makers struggling to pull out of a two-year slump are demanding cheaper prices, hurting software vendors, analysts have said.

Numerical chairman and co-founder Yagyensh Pati and Yao-Ting Wang said in October that they would sell a portion of their Numerical shares over four months to pay company loans.