>>Design wins may never cross the chasm hence no recurring revenues, no value chain etc
I agree that design wins may never cross the chasm on an individual basis. When you have 1000 design wins in a quarter, it is an absolute certainty that some will make it to market (my guess is around 35-40%). That is 100 or so design wins a month that will make it to product stage, or about 5 every business day. Think of 5 new products coming to market every single day running on VxWorks in a couple of years.
I2O illustrates the point perfectly. This was a design win from 1996 or so that is just now entering the tornado phase as far as revenues are concerned--and this tornado is just barely starting. For WIND, this is now a royalty stream with very little or no expense attached to it (other than taxes, almost the entire $10 million or so they will receive this year will drop straight to the bottom line--the $10 million is a WAG on my part, but I think I remember hearing that last year's revenues from I2O were $5 million or so.
Cable modems and DSL modems are another good example. Most of them run on VxWorks--from design wins of a couple of years ago. From the product deployment phase, these products are just beginning, but from WIND's perspective, they have moved much closer to the royalty side of the equation.
Another great example is the entire fiber optics area. Most of the equipment in this area runs on VxWorks. If you compare the market caps of these companies with their current revenues, it quickly becomes obvious that huge growth ahead is expected. They may not all make it, but its a great bet that most of the ones that do will be running on VxWorks.
Here is where I see WIND becoming hugely successful:
Lets say that you and I are going to start a company to make IP telephones (or any of a number of other products). We need to design the product, so we start by selecting the microprocessor that we will design the product around. If we decide to use Lucent's chip, it is likely that we will go with the whole reference package that they have put together, which happens to include a license for VxWorks along with it. Not good enough--maybe we pick one of Intel's new communications processors. Again, it is likely we would end up using VxWorks. How about if we want to be a virtual company, with only sales and management. With Dr Design, a subsidiary Wind picked up as part of the ISI acquisition, can do all the design work for us. I bet they recommend their own OS more than any other.
Wind has stated that their most formidable competition comes from in house systems. All of the new start-up companies coming out with all of the new products have no legacy in house systems--they have to go with a commercial OS. Wouldn't you go with the one that has two thirds of the market and that has the most supporting tools and integrated products and that supports the widest range of processors.
IMO, any talk at this point about whether or not WIND has crossed the chasm is moot--They HAVE. The only question is how much of this explosive market they will manage to capture. That is why I agree completely of their strategy of increasing top line growth, even at the expense of a reduction in bottom line profitability.
For anyone interested in doing some original research, I have a couple of suggestions--first, pick a couple of your favorite product oriented high tech companies. See if you can find out what OS these products run on. This is often difficult, as companies don't usually want to make this information public--I usually look in the help wanted section of their web site. Sometimes you can find it in the product specifications, or can deduce it from the processor they use. If they use java, there is a better than 50% chance the java sits atop VxWorks.
Another way to see the kinds of things they are doing is to peruse the help wanted ads at yahoo, monster or a similar site. Here is one of my favotites
classifieds.yahoo.com
No question about it, Wind is becoming pervisive. |
