The company hasn't planted enough seeds.
In order to justify the $1b market cap, Wind River needs to participate in a mass market. If it remains only in traditional limited markets, it's only worth $400m. Microsoft won the big RTOS set-top box contract from TCI, so clearly Wind didn't work hard enough and the only remaining big opportunity is the network computer. The Navio acquisition is their tacit admission that they don't have enough ammunition to grow rapidly. I2O developer revenue came on strong on 1997, but it won't give 1998 revenues a big kick because customers already bought their developer kits. Run-time unit volume was projected by Intel at 10m units, but now 2m units is a better projection. At $1.40-1.75/unit, revenues will not increase substantially.
Even the traditional markets where Wind has a head start over Microsoft are under siege. MS added hard real-time capability to WinCE 6 months ago and have signed some deals with Ericsson and Nokia.
You can see the effects by comparing the equity/share today to a year ago. Today, excluding the $13,343 write-off, equity is 125,339 (111,986+13,343) and there are 28,080 shares, or $4.46/share. A year ago, equity was $108,749 and there were 28,229 shares, or $3.85/share. That's a small 16% increase, indicating the stock is overpriced. If you do a pro-forma of the R&D expenses from OST and Navio, all growth completely disappears! |
