2HRS2GO: Market blows Wind River's way
By Sergio G. Non22GO
April 8, 1999 2:19pm
ZDII
Who cares about a first quarter shortfall? Wind River Systems Inc. (Nasdaq: WIND) investors surely don't.
Shares of Wind River are up 17 percent today, despite the company's announcement of lower-than-expected revenue for the current quarter, which ends this month. Fortunately, investors have every reason to believe the bottom line will improve.
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Although the Alameda, Calif.-based maker of software development tools expects earnings to fall 3 cents short of the First Call consensus estimate of 14 cents per share, the future actually looks strong and, just as important, clear.
"The uncertainty that's been tormentingly negative over the past month has been removed," says Richard Piotrowski, analyst with Everen Securities. "I've never heard as much clarity and precision about what a quarter's going to look like as I heard last night. ... Wind River really does have a good handle on its financial situation."
Wind River's expected first quarter sales growth of 25 percent will be a little less than analyst forecasts, but it's not because of a falloff in demand; on the contrary, bookings are at or ahead of expectations, company executives said during yesterday's conference call.
This quarter's revenue shortfall stemmed from delays in releasing a software development package for communications switches, but the product is still coming in the second quarter, and probably stands to benefit from the increased development time, Piotrowski said.
A minor product delay means little when you consider that Wind River's overall target market -- developers of software for "embedded systems" that run all sorts of chip-powered gadgets, like Internet appliances -- stands to expand faster than a rabbit family. Analysts expect the company to grow at a 25 to 30 percent clip.
Not only is the market growing, so is Wind River's already-leading market share. The company claims a 40 percent share of the industry for commercially-sold software tools, far ahead of its closest competitor. Even the presence of mighty Microsoft doesn't pose a real threat, says Matt Belkin, associate analyst with Hambrecht & Quist.
"Microsoft is much more focused on targeting the consumer market," Belkin says. "Ninety-five percent of Wind River's market isn't accessible to Microsoft now, because it takes to get to that level of technical sophistication."
Today's action just means investors are rediscovering Wind River after dumping on the stock for the past three weeks. "The stock had factored in a much greater disappointment that there actually was," says Matt Belkin, associate analyst with Hambrecht & Quist. "It's not that bad. The core business is not in jeopardy, but that's what the recent sell-off had suggested."
Neil |
