Forbes.com: Cadence Design Seen As 'Compelling' Value: "Cadence Design Seen As 'Compelling' Value
03.10.04, 9:05 AM ET


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Merrill Lynch upgraded Cadence Design Systems (nyse: CDN - news - people ) to 'buy' from 'neutral' and set a 12-month price target of $20. Merrill said that with the share price pulled back by about a fifth from the recent high in January, Cadence is now 'at a more compelling price/revenue and price/earnings level within the context of the peer group.' The research firm said it believes that Cadence has addressed one concern, which was the availability of new competitive technology for chip design, particularly in the physical design realm, 'an area where the company had lost ground to the competition.' Merrill said the electronic design automation group as a whole is still in the early stages of an industry recovery, from which Cadence will benefit. Cadence, similar to Synopsys (nasdaq: SNPS - news - people ) and Mentor Graphics (nasdaq: MENT - news - people ), expects the bulk of bookings to occur in the second half of the year, Merrill said. 'We are expecting about a 5% increase in customers' R&D budgets this year and next, and perhaps more if end market recovery and technology upgrades continue,' Merrill said. "