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Technology Stocks : Wind River going up, up, up!
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To: bythepark who wrote (6117)8/19/1999 8:07:00 PM
From: Mark Brophy  Read Replies (2) of 10309
 
It implies that Wind River is fairly valued.

The price of Metrowerks is really $75m after you subtract the $20m book value, or a price/sales of 2.5. Using the same valuation for Wind River, 2.5 * $146m + $168m = $533m, or $12/share. The same valuation for Phoenix would mean it's worth $15.25/share. You could also reach the same valuation for Wind River by assigning 20 P/E to $0.60 EPS. Wind River is worth more than Metrowerks because it's profitable.

Check out the Metrowerks thread at Subject 12543. Chinacat has been busy there, so maybe he has some comments.

Historically, it has been very difficult for development tool software companies to make money because the existance of the products benefits both chip makers and the software company. Wind River has solved this problem by getting the chip makers to pay for VxWorks ports. Microsoft subsidizes their tools development with profits from operating systems and applications. IBM has always considered software as a means to sell hardware, which is why they rejected the generous offer by Microsoft to sell 25% of the company during their OS/2 partnership a few years back. Motorola more than likely bought Metrowerks to increase sales of their chips.

I think undervalued microcaps like Metrowerks, Texas Micro, and SBS Technologies will continue to be bought by larger companies. Motorola bought 11% of Microware a few years back. Maybe now they'll buy the remainder.
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