Friday, February 1, 2008
I knew I was prescient when I predicted that Synopsys would pass Cadence in market cap in 2008 but I confess I did not realize it would happen so fast. Clearly Raj Seth of Cowen called it right when he read the tea leaves of the revenue makeup (see my primer on revenue recognition), saw the wall coming and downgraded them. It amazes me that any experienced analysts kept a buy on the stock after their last quarter.
Yet again I am forcefully reminded of the power of 100% ratable revenue models. We just closed our year out yesterday (with terrific results) and our revenue is a purely arithmetic calculation based on the prior year's bookings curve, not a function of what happens at the end of the quarter. That creates totally different behavior than when you have to book and ship deals to make the current quarter's revenue.