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Technology Stocks : Wind River going up, up, up!
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To: Michael Greene who wrote (1027)5/10/1997 4:02:00 PM
From: Michael Greene   of 10309
 
WIND management should be commended again this year for their annual report. A crisp two pages of highlights plus the 10K. This lack of puff and fluff suggests a management team focused on what is important.

The 10K is little different from last year except for the updated performance data. However, it does contain something on page 33 which has not been commented upon in this thread but should be noted. This is the geographic distribution of revenue and operating income. Although the company's fiscal 97 operating margin is 25% the domestic operating margin is actually 34%. The difference is accounted for by the international operations which have operating margins in single digits. This, of course, is not surprising since there are sizable fixed expenses involved in establishing subsidiary operations overseas which will not be adequately absorbed until revenues ramp up. In the long run as international revenues (currently 33% of total) increase we should expect this drag on profitability to disappear and see international margins equal or even exceed domestic. The international subsidiaries are primarily sales and marketing operations so they should enjoy a more favorable mix of high margined product revenues versus lower margined service revenues. Although they still have to provide maintenance services the engineering services should be lower.

Michael
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