The Aart of Chip-Making.

When Aart de Geus wants to escape the rigors of running Synopsys, the electronic design automation software leader he co-founded, the CEO trades computer chips for finger picks and belts out a few licks of raw Southern-infused electric blues guitar.

Now de Geus is fine-tuning Synopsys to meet the demands of a shifting, highly specialized marketplace. And it's not a simple chord to play. The Mountain View, CA-based company develops software tools to help chip designers build the complex integrated circuits that are used in electronic devices from computers and cellular telephones to Internet routers. Its customer list is a Who's Who of technology and communications, including Cisco Systems, Intel, Texas Instruments, Motorola, Nokia, and Sony--not exactly a pushover audience.

Chips are getting smaller and smarter--25 million transistors, 500 times tinier than the thickness of a strand of hair, sitting on a piece of silicon the width of a thumbnail. The ability to put an entire processing system on a minuscule chip is terrific for electronic device manufacturers that are banking heavily on the popular convergence of technology and communications. These chips are the glue for the Internet-enabled toasters, televisions, and portable gizmos that are supposed to talk with us and even to think like us. Trouble is, all the fancy bells and whistles on these advanced chips ironically make it difficult for them to operate at top speed.

As its solution, Synopsys has introduced an innovative set of tools that allows chip-makers to design faster, more efficient circuitry in a seamless automated step. The company also runs simulated functionality and verification tests for customers to ensure that the finished chips will perform to expectations. And as a third core business, Synopsys provides consulting and support services. "Designs are measured in how fast, cheap, low-powered, and reliable they can be," de Geus explains. "If we can increase the productivity of designers, that adds a lot of value."

Grabbing market share now is crucial. Chip manufacturers are just beginning a major retooling cycle expected to last up to six years. This gradual adoption of next generation tools should direct more revenue to electronic design automation (EDA) firms like Synopsys--and not a moment too soon. Annualized growth for the EDA market has been mired in the single digits since 1998, but research firm Dataquest says that's about to change. Its forecasts put EDA industry revenue from software sales worldwide at $2.7 billion this year and $5.7 billion by 2004.

"We're going through a transition into a new level of design," says Gary Smith, Dataquest's EDA analyst. "Demand for these tools is sitting at around 20 percent a year." By 2010, he predicts, companies like Synopsys, as a group, could make up a $15 billion business.

Those are compelling figures for de Geus (pronounced de-gee-us), but standing in the way of the lions share of the market are formidable rivals including Cadence Design Systems, Avant Corp., and Mentor Graphics. "This is a really hot battlefront," de Geus says. Synopsys is currently the second-largest EDA player behind Cadence, although Smith says he believes Synopsys could knock Cadence from that perch. "Synopsys is the technical leader in most of these areas," he says. "What your seeing right now is Synopsys' climb past Cadence as the leading EDA supplier."

Much of Synopsys' vision, strategy, and drive comes from its 45-year-old CEO, a Dutch-born, Swiss-raised former General Electric engineer who credits summer work on a Dutch farm between the ages of weven and 16 with developing his managerial skills. In 1986, de Gues teamed with several Research Triangle Park colleagues and with GE's blessing and investment, spun out their budding division into what eventually became Synopsys. Today Synopsys has rouphly 2,600 employees worldwide, with revenues of $806 million in the fiscal year that ended in October 1999.

Results for fiscal 2000 and 2001 will be markedly lower, owing mostly to a change in how Synopsys reports revenue. This sober announcement in July slammed the company's stock price, but de Geus insits the underlying operation is solid. "We're sticking to our order predictions of 20 percent growth next year," he says. The recent boom in semiconductor manufacturing has expanded capacity, he points our, and the services of design-related companies like Synopsys are necessary to keep the pipelind humming. "By 2001," de Gues claims, "you will see an incredibly steep climb. That's where the backlog really starts to pay off."

Aart de GEUS

Chairman and Chief Executive Synopsys

"If we can increase the productivity of designers, that adds a Lot of value."

Age: 45

Birthplace: Netherlands

Family: Married, two daughters.

Education: M.S.E.E. from the Swiss Federal Polytechnical Institute; Ph.D. in electrical engineering from Southern Methodist University.

Corporate Training Ground: General Electric

Business Motto: "Bet on the potential of people."

Hobbies: Electric blues guitar; painting

Favorite Blues Musicians: "T. Bone" Walker and "Gatemouth" Brown

Favorite Artists: Paul Klee, Pablo Picasso

Influential Management Book: The Little Engine that Could