According to Walden Rhines, EDAC chair and Mentor Graphics Corp. chairman and CEO, the year-to-year revenue decline can be attributed largely to a change in the revenue recognition model of one major EDA vendor. Rhines declined to elaborate or even name the vendor, but Cadence Design Systems Inc. is in the midst of transitioning to a more ratable revenue recognition model.

Rhines noted that the fourth quarter is traditionally a strong one for EDA. Even though revenue was down nearly 18 percent year-to-year, revenue was up from $1.26 billion in the third quarter of 2008.

Grappling with the transition to a more ratable model—which means it can't recognize revenue until later than it once did—Cadence posted a loss of $1.64 billion for the fourth quarter of 2008. Cadence reported fourth quarter revenue of $227 million, down $231 million from $458 million in the fourth quarter of 2007.

This $231 million would account for the bulk in the overall change in EDA revenue for the quarter, which was about $284 million.

EDAC said the four-quarter moving average of revenue declined 9.4 percent in the fourth quarter of 2008.

Despite layoff announcements that have dominated headlines in recent months, EDA employment declined only about 1 percent year-to-year in the fourth quarter of 2008. EDA companies employed 27,311 people in the fourth quarter of 2008, down 3.1 percent from the third quarter of 2008, EDAC said.

As he has done before, Rhines said that EDA remains relatively stable during a recession, "because companies continue to design regardless of how conditions get."

EDA's largest product category, computer aided engineering, posted revenue of about $502 million in the fourth quarter of 2008, down 24.4 percent from the fourth quarter of 2007, EDAC said. Revenue from the IC physical design and verification category was down 32.7 percent to $296.5 million, EDAC said.

Printed circuit board and multi-chip module revenue was down 11.6 percent to $135.9 million, EDAC said, while revenue from semiconductor intellectual property increased 7.6 percent year-to-year, reaching $135.9 million, according to the consortium.

Services revenue also increased, growing 24.5 percent year-to-year to $98.9 million, according to EDAC. Rhines attributed this increase to contracts that were in place before the emergence of the global recession.

North America purchased $569.1 million of EDA products and services in the fourth quarter of 2008, EDAC said, a decrease of 22.7 percent from the same period of 2007. EDA revenue declined 8.4 percent from Western Europe, 17.3 percent from Japan and 15.4 percent from the rest of the world, EDAC said.