According to market researcher International Data Corp, the market for specialized system software will be $1.7 billion by 2001. On 9/11/97 SUNW announced the acqisition of Chorus Systems and set up a new software unit, called Embedded Systems Software group.
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Also in September SUNW acquired Diba, a leading technology supplier for the information Appliance industry.
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With these recent acqisitions, IMO, SUNW is in the process of establishing themselfs as the market leader in the rapidly expanding market for so-called embedded software RTOS (Real time operating systems). Several new sources of revenue can be generated from this new technology including (1) software license fees, (2)RTOS unit royalties, (3) system service, consulting and management fees and (4) perhaps even sales from end user appliances and embedded system devises.
The current software developers in the RTOS market include Integrated Systems, Wind River Systems and even Microsoft. What SUNW needs to accomplish in this sector is to (1) establish the JAVA embedded software RTOS as an industry standard, (2) form more alliances with manufactures to develop RTOS delivery platforms (ie. Dallis Semiconductor, LSI, etc.), and (3) continue to develop with partners innovative systems and designs for end-user applications (this is where the service and consulting fees are obtained).
IMO, if SUNW can become one of the industry leaders in this market, it is possible for them to generate as much as 15%-20% of their 1999 earnings. My estimate is based on a 20%-30% market share of the "embedded software" industry as defined by International Data Corp. Lehman Bros. has estimated 1999 earnings at $2.87. Therefore, the embedded system software market for SUNW could represent as much as $0.40-$0.50 per share of new earnings for 1999.
If Sunw's management is successful in implementing their business plan for developing this new technology, Sunw's stock could be valued $10 higher from this divisons contribution to earnings. This represent an increase of 26% to the market cap. for SUNW and is an important area for the investor to keep an eye on.
I have not read too much on this thread regarding SUNW's developments in this area and I would be interested to see some additional discussion on this topic. I visited Sunw's booth last month at the Embedded System Software trade show here in Silicon Valley and was quite impressed with what they had accomplished to date. Although SUNW has much more work to do, they appear to be making the right moves lately with their acquisitions to become a dominant player in this competitive market.
EKS |
