ajtj99's Market Pulse

[MetalFillBoy]

RE: uncle_chubbie: CDNS chart.

Hello UC!

I can give you some insight on this ugly chart, because I work for them!

What happened was that Cadence is going to change the way they report revenue in the future and the analysis did not like this, as the chart shows. Instead of recognizing revenue evenly over the course of a license, they are going to recognize more in the front quarters, and less in the back quarters (as I understand it; take it with a grain of salt). Here is a brief link:

http://biz.yahoo.com/ap/071025/nasdaq_100_leaders_laggards.html?.v=1

Cadence Design Systems Inc. shares fell $2.37, or 10.9 percent, to $19.32. A Citi Investment Research analyst downgraded Cadence shares to "Hold" from "Buy," citing concerns with the chip manufacturing equipment maker's subscription bookings and a new licensing model.

If you are interested, I could probably dig up some more info on this. Thought I could shed some light on their cliff dive performance.

Edit: Looks like it should find some support around the 17.50 area, lows from late last year. Maybe good for a bounce. 19.50 would be resistance.

Edit 2: Here is a little bit better analysis on the licensing model:

http://biz.yahoo.com/ap/071025/earns_cadence_design_systems.html?.v=2

Analysts noted that a subscription bookings fell to 50 percent during the quarter as some customers moved to a new licensing model, which boosted upfront revenue. Some analyst said the shift may point to slower growth ahead.

Citi Investment Research analyst Terence Whalan downgraded Cadence shares to "Hold" from "Buy," saying the shift points to a weakening pipeline. Cowen & Co. analyst Raj Seth downgraded Cadence's rating from "Outperform" to "Neutral," saying the new model will limit visibility.

Duetsche Bank analyst Tim Fox, who maintained his "Buy" rating on Cadence, took a more optimistic view. "While the shift to more upfront business will require more sales pipeline management, we view the company's guidance of 2007 backlog growth as a positive sign that underlying bookings remain intact," the analyst wrote in a note to clients.

JPMorgan analyst Sterling Auty said Thursday's sell-off is overdone, and expressed confidence that the company has managed its pipeline to produce a strong fourth-quarter.