Mentor Graphics shares may rise with demand-Barron's

NEW YORK, May 3 (Reuters) -Shares in Mentor Graphics (MENT.O) may rise as much as 30 percent in the next year if its clients renew contracts this year as some analysts expect, according to a report in Barron's May 4 edition.

The developer of software used to design and test chips for electronic gadgets and appliances has seen its shares fall to under $7 from a 12-month high of 16 after three quarters of losses due to a slump in the semiconductor industry.

But if it gives upbeat guidance when it reports results at the end of May, Barron's said its shares could see a strong rebound as many of Mentor's clients are seen renewing and increases the size of their three-year contracts by an average of 10 percent this year.

Analysts say that even though chip makers are seeing a sharp decline in their businesses most will to keep investing in research and development (R&D) to design new products.

"Semiconductor revenue could fall 50 percent in this downturn, but only the very smallest companies will allow their R&D operations to be cut significantly," Needham analyst Rich Valera told Barron's. (Reporting by Sinead Carew)