Cadence, which reported after the market's close, posted net profits of $37.1 million, or 37 cents a share, up from $25.6 million, or 28 cents per share, for the same quarter last year. The company's year-ago comparison quarter included unusual items that narrowed percentage gains in year-over-year profit and revenue gains.
Wall Street was expecting the software maker to report first quarter profits of 36 cents, according to First Call.
Nevertheless, Cadence's stock dropped as much as 3-1/4 points in early trading today from yesterday's close of 30-1/2.
This morning, the company was downgraded by Hambrecht & Quist analyst Doug Van Dorsten to "buy" from "strong buy." The analyst could not be reached for comment on the rating change.
Revenues rose to $187.5 million for the quarter, up from $163.4 million a year ago.
Cadence's product revenues were up 26 percent to $102.3 million for the quarter over a year ago, while revenue from maintaining those products rose 8 percent to $51.5 million, compared with year-ago figures.
But gaining the biggest boost was the company's services business, which generated revenues of $33.8 million, up 47 percent from the year-ago period.
"This was a good quarter," said Mike Sottak, a company spokesman.
Cadence, during the quarter, bolstered its product portfolio in several areas. The products ranged from printed circuit board designs and logic verification.
Cadence has been hot on the mergers and acquisition trail since last year. The company has snapped up a number of companies through stock swap deals that included High Level Design Systems, a systems on a chip maker, and Cooper & Chyan Technology, a printed circuit board and integrated circuits design tool maker.
Last week the company got a boost to its business in court. Cadence, which is fighting competing software maker Avant over allegations of stealing trade secrets, expects to benefit by the recent action of a California District Attorney's office that filed charges against the company and some of its key executives. Cadence has a civil case pending in which it seeks a temporary injunction against Avant for the use of certain software.