This post was worth entering into the SI record too:
From Raging Bull
ragingbull.com
Report on Special Meeting of Shareholders:
I attended the meeting today and found it informative. The business at hand, approving the INTS merger, took
only a few minutes. Management then answered questions from shareholders for approximately 40 minutes.
Chairman Jerry Fiddler ran the meeting. I'll try to break down the Q&A session into topics covered, the first of
which was current and potential competion.
Wind believes its strength is in what Mr. Fiddler calls its "value proposition: time to market." The INTS merger
must be seen in this light. Wind currently offers clients end to end solutions that are unmatched by its
competitors and potential competitors. With regard to the companies currently offering embedded solutions,
Wind is the clear leader in breadth of offerings and support.
Microsoft was the first competitor shareholders inquired about. Mr. Fiddler stated Microsoft's technology and
business plan were not scalable and that Microsoft would not be able to leverage its Operating System
dominance into the embedded space. Mr. Shacker also responded to the question, adding that Wind is
watchful of potential developments at Microsoft, but that at this time Microsoft does not offer the end to end
solutions that Wind provides.
Echelon was the next competitive threat addressed, with Mr. Fiddler stating that they target the low end of the
embedded market. He did not see Wind losing design wins to Echelon's software product. (LonWorks) As a
side note, I have a long term investment in Echelon, ELON, and think LonWorks will be the standard in the
home networking space.
Linux was not covered by Management's response to general questions about competition. I inquired if Wind
was going to incorporate Linux and whether Wind viewed Linux based solutions as being a source of
competition. Mr. Fiddler answered in general terms that Wind was interested in any source that will allow it to
better tailor solutions for clients. He indicated that Linux doesn't provide the end to end solutions comparable to
Wind. I followed up asking what Wind's 18-24 month strategy was regarding competition coming from Linux. My
stated concern was with the market capitalization of Linux companies and the venture capital available for new
Linux businesses, what was Wind doing that would prevent a current Linux company or a start-up from a
successful entry into the embedded space.
Mr. Fiddler stated he didn't feel comfortable at this time sharing the strategic plans of the company with regard
to potential moves it might make vis-a-vis Linux. I assume he was referring to potential alliances or acquisitions.
Mr. Shacker then addressed my questions, beginning with a quote from Bill Young of Red Hat: "Linux is not an
operating system, it is a collection of source code." Mr. Shacker continued that Wind was focused on how to
solve problems for customers, and that "we will embrace Linux and apply our core competencies to it." My
opinion is that Wind is aiming to create a product line so complete that pure Linux solutions, while applicable to
specific needs, are not able to compete with Wind's products across the board. Mr. Fiddler noted that he felt
Linux wouldn't compete with many of Wind's applications, but that in some areas, such as information
appliances, Linux would be able to provide competition.
I also asked about Transmeta and BEOS. Mr. Fiddler didn't feel Transmeta would address the individual needs
Wind does, and while BEOS could, they had 10 design wins in the last year compared to Wind and Ints
combining for 4000.
Regarding a question about products in development, Dave Fisher answered that Tornado for Managed
Switches was doing very well in the industry. The delay in releasing it was due to integration issues arising
from the purchase of XACT. Wind was primarily working now on addressing hardware support for TMS. Mr.
Fisher then spoke of the Jan 20 announcement by Intel regarding its RAID product which utilizes both IXWorks
and I2O. In his words, this product has essentially commodotized its industry. Where a several thousand dollar
solution was once required, now a $200-$600 solution was available. He went on to say Intel is aiming to
provide the "brains of the internet" in the same fashion it provides the brains of PC's and that Wind is its partner
in this endeavor. Announcements from Intel will be forthcoming regarding these developments. Regarding
IXWorks and I2O he stated numerous additional potential products are in the works.
Turning to the benefits of the merger, Mr. Fiddler stated that Ints will make Wind a better value added provider.
Two examples are Ints compiler, which he noted was selling briskly within a space where free solutions are
available, and the addition of the Doctor Device team. The only Ints employee in the room (it is the first time I've
seen him, his first name is Dave) added that lots of things were being done twice at the companies. He said the
spec sheets for the next generation OS were remarkably similar, and that the combined company will be able
"to do a better job with less effort than we could have done before." Mr. Fiddler added that he had been told by
many engineers of both companies how "eerie" the similarities in approach of the two companies to products in
developments were.
The official part of the meeting closed with Mr. Fiddler noting that by virtue of its size and its possessing the
de-facto standard in the embedded world, Wind is gaining clients who were waiting for a clear leader to
emerge.
After the meeting I spoke at length with CFO Dick Kraber. In response to my questions he stated:
The convertible bonds will be called as soon as the stock stabilizes well above the conversion price. $31 is the
number if memory serves me. The earliest the bonds can be called is August. I asked him if the stock traded at
or above $70 for a period of months if that would be enough for the company to call the bonds. He replied Yes.
The feeling I got was the company may call the bonds at a somewhat lower price as long as the stock price is
stable.
The investment in Liberate will be sold off over time once the lockout period (18 months beginning in Spring
99) is over. Mr. Kraber said Wind will continue to make select investments in companies it can partner with, but
has no interest in investing in companies unrelated to its core business.
When I asked if Wind would consider being taken over, Mr. Kraber said Wind would look out for the best
interests of its shareholders, clients, and employees. He indicated a high offer may be entertained by
management, and he agreed with me that a hostile takeover would be possible, though unlikely, given
management does not have voting control over a high percentage of the combined companies shares.
In closing, I'd like to note that two new buildings are being built on the campus. Wind appears to be laying the
foundation with this merger to be the dominant force in the embedded software space. The company appears
ready to adapt to its customers needs first and foremost. This is driving Wind's approach. Exciting products like
I2O are ramping up and additional vertical solutions like Tornado for Managed Switches will be coming. The
company will lay out its vision again in the early March conference call. I advise everyone who has made it to
the bottom of this long post to listen to it, because you obviously have an interest, and feel as I do that Wind is
one of the great technology plays of the new millenium.
Snake |
