Four trading days after releasing its fiscal Q3 2006 earnings report, Synopsys (NASDAQ:SNPS) continues its slow slide down the slope. As of this writing, the semiconductor design software maker (there's a mouthful for ya) has shed 4% of its market cap after reporting on a quarter that CEO Aart de Geus described as "excellent," and one in which the company "executed well on all fronts."

I actually agree with those characterizations, myself. True, Synopsys' $0.05 per share in GAAP net profits per diluted share look pretty meager in comparison to last year's $0.12. But remember that last year's results were buoyed by a $33 million legal settlement. Absent that extra cash, the company would have reported a loss in Q3 2005 -- just as it did in Q3 2004. What we're looking at here, folks, is an honest to goodness profit earned in a quarter that is historically unprofitable for the company.

In that regard, let me make a quick aside here and point out that last year, Synopsys was transitioning from a licensing revenue recognition model, in which it recognized revenues "upfront," to the model it's currently using, in which revenues are recognized over the term of the license. You can see why this has been a painful decision. By this time in 2004, upfront revenue recognition had Synopsys at $0.63 per share for the first nine months of the year, whereas by this time last year, the switch to drawing out the recognition of revenues had the firm running at a $0.01 per-share loss.

From that perspective, 2006 is already looking like a better year, with $0.10 in profits already reported and just one more penny to go for the firm to hit at least the low end of its guidance by fiscal year-end (that being its latest guidance). Judged by the previous guidance Synopsys gave last quarter, it's already a winner, lapping the $0.08-per share low end of its guidance easily.

So, why are investors not exactly thrilled today? Perhaps because the same updated guidance that raised the low end of profit expectations last week also lowered the high end from the previous expectation of $0.17 per share, to now $0.15 per share. That's not too surprising, given the kinds of bad news we've been hearing from other "supporting cast members" of the semiconductor industry, such as Credence (NASDAQ:CMOS) and Applied Materials (NASDAQ:AMAT). But it wasn't welcome news, either. Result: a lower price.

This is hardly the first time we've seen Synopsys shares get punished for the company not maxing out its profits. Revisit how cheap it got just a few months ago in: Synopsys: You Can't Win 'Em All.

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Fool contributor Rich Smith does not own shares of any company named above.