Avant! to buy VLSI's Compass $44M deal

Electronic News, August 4, 1997 by Dylan McGrath

Fremont, Calif.--Avant! late last week agreed to purchase Compass Design Automation, a subsidiary of VLSI Technology, for approximately $44 million in cash and common stock.

By acquiring Compass, Avant! hopes to offer customers a more complete, front-to-back product line in electronic design automation (EDA). "We already had the best point tools, and now we will add Compass' knowledge of the design flow," said Vic Kulkarni, Avant! VP of marketing.

Mr. Kulkarni said Avant! has been trying to acquire a company like Compass for six months. Several strategic factors about Compass appealed to Avant!, he said, including its "silicon expedience," strong relationships with foundries, intellectual property business and attractive purchase price.

Mr. Kulkarni said another factor was Compass' existing client base. He said the acquisition gives Avant! the opportunity to persuade existing Compass customers to upgrade to Avant!'s point tool, Aquarius-XO. Existing Compass customers, with the exception of VLSI and Hitachi, which have special agreements with Compass, will be offered the opportunity to upgrade to Aquarius-XO for 50 percent less than the local list price worldwide.

Deal Highly Touted

According to Gary Smith, principal EDA analyst at Dataquest, the deal is "fantastic" news for Avant! and for users of Compass products worldwide. The acquisition both strengthens Avant! as a front-to-back vendor of EDA and ensures that Compass' technology will remain in the marketplace, Mr. Smith said.

"There are some real gems in that technology," Mr. Smith said. "That RTL floorplanner is the best in the business. Avant! also picks up some good things in the way of formal verification and libraries."

"Compass always had a solid technology but their customers wanted to have a white knight to bring out the true value of their investment," said Gerald Hsu, chairman, president and CEO of Avant!. "Compass' place-and-route customers will have a very attractive migration path to use Avant!'s technologies."

The sale also brings to a close the turbulent ride of Compass, which was launched as an independent company in March, 1991 after a 10-year period of R&D as part of VLSI Technology. In recent years, Compass has grappled with changes in management, layoffs and botched attempts at being sold.

"The selling off of Compass has probably been the worst performance in EDA history," said Mr. Smith. "They've been trying to sell that company off for three years."

In March, Paul McLellan become president of Compass, replacing Dieter Mezger, who became a consultant to the company in December 1996. In August 1996, Compass was forced to lay off 10 percent of its 300 employees and Jeff Lewis, VP of marketing, left the company to go to work for Artisan Components.

When Avant! purchased Anagram in August 1996, reports circulated that Avant! had been interested in Compass but backed off because the asking price at that time was reportedly nearly $300 million.

Meanwhile, Avant! was granted a delay in hearings on its motion to disqualify the Santa Clara County district attorney's office from prosecuting the felony case against six Avant! employees, including Mr. Hsu, and another individual. The hearing to determine whether the Santa Clara County district attorney's office should be allowed to prosecute the case was to be held on July 28, but Avant! filed a motion stating that a protective order had to be in place before that hearing could begin. Avant!, which claims the district attorney has improperly solicited help in this case from Cadence Design Systems, a key competitor, wanted the protective order in place to protect trade secrets that might be exposed during a hearing.

"We want to get this case going as soon as possible," said deputy district attorney Julius Finkelstein.

A new date for the hearing will be set Aug. 25.