from briefing.com
<<<< Wind River Systems Inc. (WIND) 35 5/8 -3 3/8: WIND shares are trading lower today, despite reporting another solid
quarter. WIND is one of those stocks that trades up prior to the earnings release then sells off on the good news. This
quarter was no different as the shares ran 18% from Friday's close to end yesterday's session at 39, then promptly gave up
8.6% after the release. But don't blame the company, for they once again posted strong revenue growth of 34% Y/Y, and
even posted a slight sequential sales gain in a quarter that traditionally comes in weaker for Wind River. Consensus revenue
estimate for the quarter was $86.4 mln and Wind topped that by 6% posting Q1 sales of $91.6 mln. Earnings also topped
forecasts, coming in at $0.10 per share on an operating basis ($0.01 gain on sale of securities) versus the First Call mean
estimate of $0.08. Gross margins were squeezed, as expected due to the integration of Integrated Systems which historically
operated at lower margins than Wind River. Blended GM was 75.8%, versus Q4's 77.3%; Wind River historically enjoys
margins of about 80%, and is in the process of bringing the combined company's GM back to the 80% neighborhood. What
we really liked about this quarter's report was the fact that run-time royalty revenues were broken out and came in at 22% of
total sales, going forward expect this highly visible recurring revenue stream to represent a larger percentage of sales as
more OEM products come to market. 847 design wins was also encouraging for a traditionally weak quarter. The only item
that may have been a negative surprise was the high R&D expense line ($18.3 mln or 19.9% of revs). The R&D can be
explained by the challenges involved in integrating the numerous products of their recent acquirees into the Wind River line
as well as new engineer hirings. The high R&D line is not what is causing the stock to dip today, and is not an issue of
concern given the strong top line growth and the seemingly excellent integration job Wind River is performing. Prospects for
the embedded systems market continue to look very strong as more non-PC devices flood the consumer and industrial
markets. As we mentioned last time we wrote on Wind River, the company's largest competitor, Integrated Systems is now
in-house and Wind River dominates the embedded system software space with a commanding 30% share of a rapidly
growing market. - Matt Gould, Briefing.com >>>>
regards,
blg |
