why can't WIND be considered to be in a tornado state when several of its markets, where it has significant pentration (90% of DSL modems for example), are in tornados?
Companies don't have tornados, products and markets have tornados.
The FM states that the hypergrowth is “not untypically 300% per year in the very early going”. It does not say that the revenues of the eventual gorilla are growing at this rate, it says that the market is growing at this rate. It doesn’t say that every gorilla will have revenue increases of this magnitude at some point in its life; it only says that every gorilla has its market share set during a tornado. Not every company that experiences 300% revenue growth will be a gorilla, and not every gorilla will see 300% revenue increases.
Look at the markets that WIND’s technology is enabling, and look at the market share that WIND has in those markets. Cable modems, DSL modems, set top boxes, switches, routers, optical networking devices, etc. are all in the middle of tornados, and, to a great extent, it is Wind that provides the enabling technology. Almost anything requiring connectivity seems to have Wind involved to some extent.
Since I don’t agree with looking only at revenue increases as a determination of whether a market is in a tornado, I need to find another metric. If I refer to the FM, I can read the following:
“It is primarily a function of the market itself desperately needing to set technology standards to interface all this proliferation of new products into the existing infrastructure of systems. Unfortunately, because the market is just taking off, there are no such standards, nor in the midst of hypergrowth is there time to deliberate upon them. So the market makes do with de facto standards, basing those on the product architecture of the market leading vendor.”
If you buy into the idea that all of the devices that collectively make up the Internet are in a tornado, then it becomes almost a certainty that Wind is, or will become, a gorilla. How else do you explain the market share that they have. Look at all of the acquisitions that Intel, Nortel, Cisco and Lucent have made in the last two years. Virtually 100% utilize software provided by Wind as an enabler of their technology. How else do you explain that they are the reference platform for 9 of the 10 network processors? (If you don’t know what a network processor is, keep in mind that AMCC just agreed to pay $4.5 billion for MMCN, which is one of the 9 vendors that uses Wind for the reference platform). How else do you explain Lucent using them as the reference design for their voice over IP platform, LSI using them as the reference platform for their set top box platform, or Cisco using them as the reference platform for their Networks platform? Why else would it be Xilinx, and not Wind, that issues a press release to announce that they have joined Wind River’s WindLink program? The reason for all of these things is that the market desperately needs standards, and because it is in hypergrowth with no standards, it is coming up with de facto standards, basing them on the product architecture of the market leading vendor. That vendor is Wind River Systems.
Microsoft provides a perfect example of a gorilla that has never had even 94% year over year growth (at least since YE6/1985, when it had only $140 million in revenue for the entire year—Wind will have about $440 million in revenue this year). In fact, out of the 60 quarters since then, it has only had 3 quarters where the year over year revenue growth exceeded 80% (87-1, 87-3 and 88-2, which were 91%, 92%, and 93%). 30 of the quarters had less than 40% YOY growth, there were 10 quarters each between 40%-50% and 50%-60%, and 5 quarters with 60%-70%. (If you want to see for yourself, use this link and select Microsoft Quarterly Financial History microsoft.com ) If you waited to see 200% year over year revenue growth for Microsoft before getting in, you never got in. I suspect that if someone has the revenue figures for the PC industry during this same time period, you would certainly see some huge year over year revenue increases, but it never happened to Microsoft, even though they, along with Intel became the biggest winners in the industry. I’ve placed my bet that the same may be true for Wind and the internet infrastructure.
Above is only IMO, come to your own conclusions. |
