| The Company's strategy of targeting semiconductor manufacturers that participate in, or may enter, the System-on-a-Chip market requires the Company to compete in intensely competitive markets. Within the merchant
segment of the IP component market, the Company competes primarily against
Aspec Technology, Inc. ("Aspec"), Avant! Corporation ("Avant!"), Cascade
Design Automation Inc., a subsidiary of OKI ("Cascade Design"), Mentor
Graphics Corporation ("Mentor Graphics"), and the Silicon Architects group of
Synopsys, Inc. ("Synopsys"). In addition, the Company may face competition
from consulting firms and companies that typically have operated in the
generic library segment of the IP market and that now seek to offer customized IP components as enhancements to their generic solutions. The Company also faces significant competition from the internal design groups of the semiconductor manufacturers that are expanding their manufacturing
capabilities and portfolio of IP components to participate in the System-on-a-
Chip market. These internal design groups compete with the Company for access to the parent's IP component requisitions and may eventually compete with the Company to supply IP components to third parties on a merchant basis. There can be no assurance that internal design groups will not expand their product offerings to compete directly with those of the Company or will not actively seek to participate as merchant vendors in the IP component market by selling to third party semiconductor manufacturers or, if they do, that the Company will be able to compete against them successfully. In addition to competition from companies in the merchant IP component market, the Company faces competition from vendors that supply electronic design automation ("EDA") software tools, including certain of those mentioned above, and there can be no assurance that the Company will be able to compete successfully against them. |