For much of the year, shares of Mentor Graphics
Mentor Graphics develops electronic design automation (EDA) software, which is used to develop circuit boards and other peripherals. Its customers include IBM
Fiscal Q2 revenues came in at $205.7 million, up 15% year over year. On the conference call, management described strength across all product lines, even in the automotive sector, where Ford
Net income was $2.4 million, or $0.03 per share, compared to a loss of $448,000 or $0.01 per share in the year-ago period. Keep in mind that Mentor took a $4.1 million charge for in-process R&D because of its $90 million acquisition of Sierra Design Automation in early June. The deal seems like a smart move; Sierra's technologies address the complexities of next-generation designs, which involve ultra-small, high-performance chips.
After staying flat for a few years, the EDA market made a comeback last year, but that strength might not be sustainable. Mentor's management seems to foresee a rosy environment, though. The company has provided a healthy full-year revenue estimate of $860 million, and management predicts earnings of $0.55 per share.
On a quarter-to-quarter basis, Mentor has shown lots of volatility over the years, giving investors whiplash. Things may be different this time -- but I still think there's risk here. The stock may be good for quick-trigger traders, but not so good for the portfolios of long-term Foolish investors.
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