Synopsys Inc., a Nasdaq-listed firm and a maker of electronic design automation software products, is eyeing acquisitions in the software security space as it plans to repatriate up to $850 million of overseas earnings to take advantage of the proposed U.S. tax reforms, Dr. Chi-Foon Chan, president and co-chief executive officer of the firm said in an interview.
“We anticipate there may be tax reforms,” Dr. Chi-Foon said. “It gives us the capability of having cash in the U.S. and we anticipate that it will be a beneficial financial move. It will basically allow us to have flexibility in stocks or [put to] other usage. It is a continued judgement call.”
The Synopsys board on September 8 had cleared a proposal to repatriate between $775 million and $850 million of cash held offshore by the third quarter of the year which ends on October 31. The U.S. lawmakers have indicated support for the deemed repatriation scheme.
A week ago, Synopsys also announced a plan to buyback $100 million worth of its stocks as per an accelerated share repurchase scheme. The company ended Q3 with $1.3 billion cash in hand and a total debt of $436 million. It has repurchased $300 million of stock so far this year and has $500 million remaining on their current authorisation, Trac Pham, CFO, told investors, according to a web transcript.
“We can repay some debt but debt is cheaper right now. That is why I used the term flexibility,” Dr. Chi-Foon said. The California-based company is also planning to use the cash at hand to fund acquisitions.
‘Open field’
“Clearly the emphasis on the number of acquisitions is on software security side,” Dr. Chi-Foon said. “It is an open field of many things. In the end whatever you acquire will set your strategy of where you go. I think you could say we are more interested in that area. We are not prioritising one over the other. The need is different.”
Dr. Chi-Foon said Synopsys approached an acquisition based on “some technology we do not have or develop it fast or have the capability to develop, or.... because of the customer base you do not have. You acquire because there is some new area which is expanding and it helps your strategy.”
Synopsis operates in three businesses — electronic design automation, semiconductor IP and software integrity of cybersecurity.
“If you look at the IP business, the design block that goes into a chip, it is doing better than semiconductor business. It is growing at double the rate of the semiconductor business,” Dr. Chi-Foon said. “If there is an underlying theme of where we are going, then it is IoT and AI, and automotive. Security and safety is most important in all these verticals,” according to Dr. Chi-Foon.
The company has raised its revenue target for the calendar year 2017 to between $2.67 billion to $2.685 billion, a growth rate of between 10% and 11%.