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Author: kmorley123 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 3  
Subject: Wow! This board is quiet! Date: 9/2/2008 12:24 PM
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OK, there's been only one post to this board over the last six-odd years. Maybe we can get get and keep a discussion going on LAVA.

For the record, I don't currently have any position in LAVA, but I've known Roy Jewell (President and COO) for a very long time.

Magma Design Automation develops, licenses and supports software used for semiconductor design. The company went public in 2001 and the stock is currently at an all time low. Total market cap is currently $220M.

Magma's major competitor is Synopsys, which is a much larger company with a current market cap of $3.1B.

Management has acknowleged a host of "challenges" recently. Last Thursday, management elaborated on major problems in the sales organization, reported a small loss on declining sales, reduced outlook for the remainder of the year and announced implementation of a new business model. The filing is at http://tinyurl.com/69qa56

Investors had already assumed the worst and sold off prior to the announcements, but that still pushed the stock to an all time low of around $4.60 intraday. It's since rebounded slightly to a little over $5, but that's quite a drop from the $14-15 range that the stock traded in at the end of November 2007.

I think the market may have overreacted and that this may be an opportunity for a turn-around. Here's my thinking:

With the economy being soft, few chip makers are profitable right now and so they aren't making capital expenditures unless they absolutely must. But it's not as if Magma's software is optional. At best, the designers and foundries can delay purchases for a quarter or two. When they can't delay further, Magma is going to have a strong quarter.

Even though Magma has been losing money, they have sufficient cash on hand to last until they can get things turned around and/or the chip makers are finally forced to buy.

I also think there's significant possibility of Magma being bought and I think Mentor is the most likely candidate.

That's all for now. I hope that someone, somewhere will read this and contribute or rebute.

Cheers!

Ken
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