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FILED BY:
Innoveda, Inc.
SUBJECT COMPANIES:
Innoveda, Inc. (Commission File No.: 000-20923
PADS Software, Inc. (Commission File No.: N/A)
MERGER Q&A
BUSINESS Q&A
Q. YOU COMPLETED THE VIEWLOGIC/SUMMIT MERGER TWO MONTHS AGO. YOU REPORTED IN
YOUR Q1 EARNINGS RELEASE THAT YOU HAVE MADE GOOD PROGRESS IN INTEGRATING
THE FUNCTIONS OF THE COMPANIES. ARE YOU MOVING TOO FAST WITH ANOTHER MERGER
BEFORE YOU GET THE FIRST ONE SQUARED AWAY?
A. No. We feel very comfortable that we are well prepared to implement this
merger successfully. The decision to acquire a PCB design company has been
part of our strategic plan since the spinout of Viewlogic from Synopsys, so
it has been well planned and anticipated. As reported in our Q1 results
press release and conference call, the Viewlogic/Summit merger has been
proceeding well and we are performing in line with our financial plans.
Innoveda's well-seasoned management team has demonstrated it has the
competency to efficiently integrate organizations and deliver immediate
value to their customers. This merger is also "geographically friendly" in
that the two companies' headquarters are located nearby and the management
team and distribution channels have been conducting joint business for many
years.
Q. DO YOU FEEL THIS MERGER WILL HAVE A FAVORABLE IMPACT ON INNOVEDA'S STOCK?
THE CURRENT STOCK PRICE IS RELATIVELY LOW. WON'T IT REMAIN THAT WAY IF
INNOVEDA TAKES A WRITE-OFF FOR THIS MERGER?
A. The deal is accretive to Innoveda excluding one-time merger costs and
ongoing amortization charges. We also believe this merger will have a
favorable impact on our combined financial results through efficiency of
combined operations and broader distribution capabilities. The costs of the
merger are offset by the increased shareholder value of the combined
product offerings and the ability to have a stronger position in a market
segment.
It is our belief that analysts in our industry focus on EBITA, or earnings
before interest, taxes and amortization. This will become increasingly
prevalent as pooling of interest transactions becomes more difficult to do.
As such, neither the increased amortization that we will have as a result
of this merger, nor the write-off amounts affect the value of the merger.
We believe that top-line growth and operating income expansion are far more
important metrics of our success. With this merger, we are in a better
position to grow our revenue stream and expand our operating income.
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Q. YOU SAY THAT THE MERGER DOES NOT REQUIRE SHAREHOLDER APPROVAL. WHY NOT?
A. Innoveda shareholder approval is required only if the percentage of stock
issued exceeds 20 percent of the outstanding shares. The terms of this
merger are a combination of stock and cash, and the shares issued do not
exceed 20 percent of the outstanding shares of Innoveda stock. Thus,
Innoveda shareholder approval is not required to complete the merger.
However, PADS shareholders must approve the merger.
We will be filing an S-4, to register the shares that will be issued in
exchange for PADS shares.
Q. IS INNOVEDA'S STRATEGY TO GROW THROUGH MERGERS AND ACQUISITIONS RATHER THAN
PRODUCT REVENUES? IF SO, WHAT TYPES OF EDA COMPANIES ARE YOU TARGETING?
A. Innoveda believes it can outpace the growth of companies in the EDA market
beginning in the latter half of 2000 through increased sales of existing
and soon-to-be-introduced products and services. We will always be
interested in acquiring companies that complement our strategy to become
the leading supplier of electronic product design solutions.
Q. HISTORICALLY VIEWLOGIC HAS POSITIONED ITSELF AS A "PCB NEUTRAL" CAE
SUPPLIER. WHY IS INNOVEDA CHANGING THIS CORPORATE POSITION? WHY WAS PADS
SELECTED OVER OTHER PCB OFFERINGS?
A. We will continue to support PCB design flows from popular PCB tool
suppliers. We also realize that as electronic products increase in
complexity, designers of these products must understand all the issues
associated with an electronic design. These trends demand tight integration
and collaboration between upstream and downstream product development
processes. Innoveda has recognized the transition in the marketplace from
requiring best-in-class technology to single vendor integrated solutions
and has responded accordingly by acquiring a PCB tool supplier. PADS was
selected over other PCB suppliers due to the shared vision of providing
solutions that help companies design products not circuits, breadth of
products and technology to support downstream processes, little product
overlap with Innoveda's offerings, excellent market position in physical
design and manufacturing, and common distribution channel.
Q. WHAT WERE PADS' REVENUES AND PROFITS FOR 1999? WHERE DOES THE MAJORITY OF
THE COMPANY'S BUSINESS COME FROM? HOW DOES THIS COMPARE WITH THE GEOGRAPHIC
REVENUE SPREAD OF INNOVEDA?
A. PADS' revenue for 1999 was $25.7 million. PADS has a worldwide installed
customer base and a geographic revenue distribution very similar to
Innoveda's.
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Q. PADS GROWTH HAS EXCEEDED EDA INDUSTRY GROWTH. HOW HAS PADS ACHIEVED THIS?
A. By delivering increasing value to its customers, successfully managing the
operations of the company, and staying focused on its core competencies in
PCB design. PADS expanded its business into high-speed design through the
acquisition of HyperLynx and into manufacturing interfaces through the
acquisition of ACT. PADS' recent introduction of the BlazeRouter provides
an additional business expansion into auto-routers.
Q. HOW WILL THE MERGER AFFECT THE SALES CHANNELS? WE UNDERSTAND THAT BOTH
INNOVEDA AND PADS USE VARS, AND INSIDE AND DIRECT SALES.
A. PADS' sales channels will be merged into Innoveda's. The two companies have
very little product overlap and have shared a common VAR channel for many
years. In fact, we believe the sales channels will react positively to this
merger as they have been conducting business with both companies for many
years and will view this merger as an increase in operational efficiency.
Q. PLEASE POSITION INNOVEDA IN THE PCB DESIGN MARKET.
A. The PCB design market is divided into the following sub-applications
defined by the market analysis firm Dataquest - PCB Place and Route, PCB
Physical Analysis, MCM Hybrid Packaging Layout, PCB Spice, and PCB CAM.
Innoveda and PADS individually are key players in their own
sub-application. Innoveda, for example, leads the sub-application market
space for Physical Analysis with a 34 percent market share, while PADS
holds the number two position on the NT platform in the PCB Place and Route
space. PCB layout continues to be the largest part of the PCB design
market. Innoveda not only dominates the Physical Analysis market space, but
also provides the front-end design tools for many of the leading PCB place
and route layout systems in the market. With the addition of PADS, Innoveda
now has an extensive PCB design flow that includes entry, simulation,
layout, routing, analysis and pathways to manufacturing. Design complexity
at the chip level is also increasing the need for integration between chip
package and board. The combination of PADS PowerBGA and PowerPCB tools help
address this growing concern. For many, Innoveda will become a supplier of
all the tools and services needed to capture, verify and create PCBs and
advanced IC packages.
Q. WHAT ARE YOUR LONG-TERM GOALS FOR THE COMBINED COMPANY?
A. Our mission is to be the leading provider of electronic product design
solutions.
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PRODUCT Q&A
Q. INNOVEDA'S VIEWDRAW SCHEMATIC CAPTURE TOOL INTERFACES TO VIRTUALLY ALL OF
THE PCB DESIGN LAYOUT TOOLS. HOW WILL THIS MERGER AFFECT THOSE DESIGN
FLOWS?
A. Innoveda has long-standing, successful relationships with many leading EDA
vendors that have resulted in successful PCB design flows based on our
ViewDraw schematic capture and XTK signal integrity analysis tools. We
fully intend to continue to support these flows for the benefit of our
mutual customers. We believe our partners share our desire to work
cooperatively in the best interest of the customer base, and we look
forward to working together with them to improve our joint design PCB
design flows.
Q. ISN'T THERE OVERLAP BETWEEN INNOVEDA'S XTK AND PADS' HYPERLYNX PRODUCTS?
HOW DO YOU PLAN TO RESOLVE IT?
A. Innoveda and PADS do have a slight overlap in signal integrity analysis
tools, and once the merger is completed the companies will develop plans
for both products. We believe that the combined teams of people and
technologies will enable further development of unique signal integrity and
EMC products. Our initial priority is to ensure all of our customers suffer
no loss of productivity and continue to successfully utilize our tools in
their high-speed board design processes. We feel that one of the benefits
of this merger is that the combined company will have a dominant position
in high-speed design analysis tools.
Q. DO YOU PLAN TO CONTINUE OFFERING ALL OF PADS' TOOLS? HOW ABOUT THEIR
SCHEMATIC CAPTURE OFFERING?
A. As with signal analysis, there is some overlap in schematic capture. It's
our goal to deliver a single unified schematic capture offering. Upon
completion of the merger, both companies will analyze their respective
markets and develop plans for a single schematic capture tool. In addition,
Innoveda plans to offer the PADS tools on the UNIX platform.
Q. WILL THE MERGER ENABLE INNOVEDA TO OFFER A COMPLETE FRONT TO BACK PCB
SOLUTION TO CUSTOMERS?
A. PCB designers are constantly faced with producing more complex boards in
less time, and thus urgently need to improve the productivity of their
engineering organizations. A front-to-back solution refers to an integrated
environment that provides a seamless PCB design flow from concept to
manufacturing. The front of the process refers to the design capture,
library management and pre-layout analysis tasks that occur before the
physical design of the PCB. In addition to ViewDraw, Innoveda's schematic
capture solution and ePD, Innoveda's PCB Design Environment, Innoveda
provides the Design Exchange suite of tools for library and design data
management
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that allows efficient creation of the design and ensures the
integrity of the design by providing Internet-enabled revision control.
Innoveda's ePlanner interconnect planning tool provides the PCB designer
with a "what-if" environment that allows optimal termination and placement
strategies to be determined prior to physical design. PADS PowerPCB and
PowerBGA tools with the BlazeRouter provides an efficient physical design
of the PCB and advanced packages, and the combined strength of the
company's high-speed design tools provide a "sign-off simulation" process
to avoid product failures due to high-speed design issues. PADS CAM-350
manufacturing tools optimize the PCB database for bare board fabrication
and test to ensure efficient and error-free PCB manufacturer.
We believe that Innoveda will provide a complete front-to-back design flow
from design capture and planning, through physical design and analysis, and
interface to manufacturing. This is the first time customers can acquire a
complete front-to-back design process from a single vendor.
Q. WHAT HAPPENS TO PADS' HYPERLYNX AND ADVANCED CAM TECHNOLOGIES (ACT) GROUPS
AS A RESULT OF THE MERGER?
A. All of PADS will be integrated into Innoveda, and no independent operations
will exist.
Q. PADS HAS TYPICALLY BEEN KNOWN AS A SUPPLIER TO THE LOW-END PCB MARKET, AND
INNOVEDA HAS BEEN TARGETED AT HIGH-SPEED DESIGN. EXPLAIN HOW THIS IS A FIT.
A. With the constant migration to more advanced silicon technologies, the
majority of board designers are now faced with high-speed design issues
that arise from fast signals. PADS has moved upstream in the market by
acquiring HyperLynx and developing the BlazeRouter. Innoveda offers the XTK
tool for high-end power users. Thus the two companies have naturally
converged on the same market. The benefit of the merger is that both
companies' products are now offered through a wider distribution channel
and the PADS physical design tools can be integrated with the Innoveda
analysis tools to provide even better solutions for high-speed board
design.
We also plan on porting PADS' tools and Latium architecture to UNIX
platforms for broad availability coupled with Innoveda's technology.
Q. WHAT ARE INNOVEDA'S PLANS FOR PADS' LATIUM ARCHITECTURE?
A. Upon completion of the merger, the companies will develop long-term plans
for all products and technologies. Latium provides the infrastructure for
how PADS products communicate and has been very successful. Innoveda will
decide how best to leverage the Latium architecture in the combined
company's products.
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PERSONNEL Q&A
Q. HOW MANY EMPLOYEES DOES EACH COMPANY CURRENTLY HAVE? WILL THE MERGER RESULT
IN LAYOFFS AT EITHER COMPANY? IF SO, HOW MANY? WHAT AREAS OF THE BUSINESS
WILL THEY BE FROM? WILL THESE EMPLOYEES GET A SEVERANCE PACKAGE AND, IF SO,
WHAT WILL IT BE LIKE? HOW MANY EMPLOYEES WILL THE NEW COMPANY HAVE?
A. Innoveda has approximately 425 employees and PADS has approximately 140
employees. It is expected that a small number of employees will be
displaced as the two companies merge operations. A final headcount of
employees will be determined once the merger is completed and integration
plans are finalized.
Q. WHAT WILL THE INNOVEDA MANAGEMENT TEAM LOOK LIKE AFTER THE MERGER? WHAT
POSITIONS WILL THE PADS' EXECUTIVES HOLD?
A. Innoveda will continue to be managed by its current team with the addition
of key PADS managers taking certain operational leadership roles. Ken
Tepper will assume a role as vice president. He will continue to be
responsible for the PADS product offerings, and will also assume additional
responsibilities for the Innoveda PCB tools.
FORWARD-LOOKING STATEMENTS
This Q&A document includes forward-looking statements that are subject
to a number of risks and uncertainties. All statements, other than statements of
historical facts included in this press release, regarding Innoveda's strategy,
future operations, financial position, prospects, plans, goals and objectives of
management are forward-looking statements. When used in this press release, the
words "will", "believe", "anticipate", "intend", "estimate", "expect",
"project", "plan" and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements contain
these identifying words. We cannot guarantee future results, levels of activity,
performance or achievements, and you should not place undue reliance on our
forward-looking statements. Our forward-looking statements do not reflect the
potential impact of any future transactions or strategic alliances.
Our actual results could differ materially from those anticipated in
these forward -looking statements as a result of various factors, including
obtaining stockholder approval and the satisfaction of other conditions to
closing the merger, the ability of Innoveda to successfully integrate the
operations of PADS, the acceptance of the combined companies' products in the
marketplace, the ability of Innoveda to successfully develop new products, and
the other risks described in the registration statement on Form S-4 (File No.
333-89491) filed on October 22, 1999, as amended, in Innoveda's most recent
quarterly report on Form 10-Q and annual report on Form 10-K and other public
filings made by Innoveda with the Securities and Exchange Commission, which
factors are incorporated herein by reference.
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ADDITIONAL INFORMATION AND WHERE TO FIND IT
Innoveda intends to file a Registration Statement on Form S-4 in
connection with its acquisition of PADS and PADS expects to mail a Proxy
Statement/Prospectus to its stockholders containing information about the
merger. Investors and stockholders are urged to read the Registration Statement
and the Proxy Statement/Prospectus, when they become available. The Registration
Statement and the Proxy Statement/Prospectus will contain important information
about Innoveda, PADS, the merger and other related matters. Investors and
stockholders will be able to obtain free copies of the Registration Statement
and the Proxy Statement/Prospectus, when filed, through the web site maintained
by the United States Securities and Exchange Commission at http://www.sec.gov.
Free copies of the Registration Statement and the Proxy Statement/Prospectus,
excluding exhibits, may also be obtained from Innoveda, when available, by
directing a request to Innoveda, Inc., 293 Boston Post Road West, Marlboro,
Massachusetts 01752, Attention: Peter T. Johnson., telephone: (508) 480-0888.
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