Carl Icahn is busy swinging his big capital around.

Sometimes it works out perfectly, like when Icahn convinced Oracle (Nasdaq: ORCL) to pay top dollar for BEA Systems.

Sometimes the victory is less than perfect, as in the just-announced $2 billion deal to sell Lawson Software (Nasdaq: LWSN) to private equity firm Golden Gate Capital-- after Icahn built an 11% stake in the company and started pushing for a sale. In this deal, Icahn never quite got the buyout premium he wanted.

On occasion, Icahn fails miserably. His much-publicized major stake in Blockbuster ended in disaster as competition from Netflix and others forced the video rental chain into bankruptcy. Even there, Icahn was thwarted as his asset bids were trumped by satellite broadcaster DISH Network (Nasdaq: DISH), and Icahn was sent away with mere pennies on his invested dollar.

And then you have the knock-down, drag-out battles. That's where Mentor Graphics (Nasdaq: MENT) comes in.

The maker of tools for designing electronic gadgetry has a wholesale buyout bid from Icahn on the table of $17 per share. The company suffers from "a bloated expense structure and massive share dilution," according to Icahn, and would be better off under the mentorship of a new owner or at least a severe cost-cutting program.

But Mentor wants none of that filthy lucre and is digging in its heels to fight him off. So the affair has turned ugly with competing proxy ballots and crosswise, public mudslinging. Icahn wonders if it isn't time for new thinking after watching the stock going nowhere for 17 years, while Mentor wants to focus on a much shorter timeframe. Here's what it boils down to:

Company

1-Year Return

2-Year Return

17-Year return

Mentor Graphics

65%

133%

27%

Cadence Systems (Nasdaq: CDNS)

39%

116%

208%

Synopsys (Nasdaq: SNPS)

18%

25%

183%

S&P 500 Index (with reinvested dividends)

16%

62.6%

299%

Source: Yahoo! Finance.

Both sides of the argument have a point, of course -- Mentor has indeed outperformed the market and its rivals in the short term but lagged in the bigger picture. As for cost controls, Mentor shaved 5% off its SG&A expenses between the third and fourth quarters, and makes much of that fact in its communications with Icahn -- but then again, it's a seasonal pattern:

Fiscal Year

SG&A Margin Drop, Q3 to Q4*

2008

12.1%

2009

7.3%

2010

5.7%

2011

5%

Source: Capital IQ, a division of Standard & Poor's. *Expressed in percentage points.

... and when management points to a seasonal variance as evidence of proactive cost-cutting efforts, you have to wonder what else they're spinning at high velocity.

Whether Icahn wins this nasty duel, Mentor could use some of the medicine he's suggesting. And no, I don't think management is taking it on its own.

How would you fix what ails Mentor Graphics? Discuss in the comments below

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.