Wednesday, July 23, 2008
Cadence (CDNS) announced Q2 results today and, while they made the quarter, they've lowered Q3 guidance as a result of forecasting a change to a ratable revenue level of 90% (see primer on revenue recognition).
It's like GroundHog Day for investors - perpetual changes in EDA revenue model that crater the stock - subsequent resets of guidance one after the other. Dire results as TheStreet.com reports. Then EDA companies wonder why there are so few sell-side analysts covering the space? It's happened before many times - when will all EDA vendors get smart and transparent about their revenue - or investors get smarter about the truth underneath their software models? Maybe now?
As I posted in December last year the power of a subscription revenue model is that revenue is ratable - it's smooth - and most importantly it's never a surprise. Looks like Cadence is maybe, finally, figuring that out?
Note1: the "redux" in the title refers to the revision of Apocalypse Now - "Redux" released in 2001 - fantastic film.
Note2: FirstRain's revenue model is 100% ratable.