Mentor Graphics Acquires Sierra Design Automation for $90 Million

Mentor Graphics Corporation (Nasdaq:MENT) announced it has acquired Sierra Design Automation (Santa Clara, Calif.), a leading provider of high-performance place and route solutions. The company was purchased for $90 million, payable 50 percent in cash and 50 percent in Mentor Graphics common stock.

“Combining Mentor’s market-leading design-for-manufacturing (DFM) capabilities with Sierra’s proven variability and lithography-driven place and route solution gives our customers the edge they need to achieve rapid design closure with high yield,” said Pravin Madhani, president and CEO, Sierra Design Automation. “At 65 and 45 nanometers (nm), discontinuities such as process variation, design size, low power and DFM are creating a major disruption in physical design. The merger with Mentor enables us to deliver a powerful design-to-fab flow that addresses these discontinuities in a comprehensive fashion.”

“Mentor’s success with the Calibre product was built upon recognizing a market discontinuity and capitalizing on it. We see the same type of discontinuity happening in this market,” said Walden C. Rhines, CEO and chairman, Mentor Graphics. “Our leading-edge customers are telling us that they need a design-to-fab flow capable of handling dozens of process corners and multiple modes, all while addressing manufacturability challenges to achieve manufacturing closure of their designs. Mentor’s and Sierra’s leadership in these areas make us a natural fit. The acquisition of Sierra expands Mentor’s leadership in DFM, and provides the integration that customers need between physical design, and back-end verification and yield-enhancement.”

“STMicroelectronics is designing some of the world’s most complex chips and is aggressively pursuing advanced process geometries with 65 and 45 nm designs in production and in progress today,” said Philippe Magarshack, Group Vice President, Central CAD General Manager, STMicroelectronics. “We decided to partner with Mentor and Sierra 18 months ago to address critical discontinuities that we identified in the design flow including low-power, design for variability and manufacturing. We are very impressed with the quality of the results of this partnership, which allows us to blend manufacturability know-how into the physical synthesis and routing phase.”

Sierra’s flagship Olympus-SoC product delivers innovative technologies for 65 and 45 nm processes. It provides the next-generation place and route system that concurrently addresses variations in lithography, process corners and design modes. Integral to Olympus-SoC is Sierra’s detailed routing architecture which embeds variation-aware timing, optimization and litho-modeling to address optical proximity correction (OPC) and resolution enhancement technology (RET) effects early in the design cycle ensuring faster timing closure for complex process rules. It is capable of simultaneously solving for dozens of different process corners and design modes, ensuring an optimized chip without unnecessary guard banding.

Mentor Graphics will continue to sell and support Sierra’s products through its global sales and support organizations.

Because of this acquisition, the company now expects non-GAAP fiscal 2008 second quarter earnings to be in the range of $.06 to $.08, down $.02 from previous guidance. For the full fiscal year ending January 31, 2008, the company expects the acquisition to be neutral to slightly accretive. The company cannot yet assess GAAP earnings impact until the finalization of purchase accounting, but expects GAAP non-cash charges arising from the acquisition to cause larger decreases in GAAP earnings than in non-GAAP earnings. The company will complete this assessment and report its revised GAAP outlook during its second quarter fiscal 2008 earnings call. Consistent with the company’s previous presentation of non-GAAP earnings, non-GAAP earnings exclude amortization of purchased intangible assets which include purchased technology, backlog, trade names, customer relationships and employment agreements. Non-GAAP earnings further exclude in-process research and development charges, special charges and stock-based compensation expenses.

About Mentor Graphics
Mentor Graphics Corporation (Nasdaq:MENT) is a world leader in electronic hardware and software design solutions, providing products, consulting services and award-winning support for the world’s most successful electronics and semiconductor companies. Established in 1981, the company reported revenues over the last 12 months of about $800 million and employs approximately 4,200 people worldwide. Corporate headquarters are located at 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777.

Mentor Graphics and Calibre are registered trademarks of Mentor Graphics Corporation.