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Technology Stocks : Wind River going up, up, up!
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To: David Schoenbach who wrote (1162)5/29/1997 9:22:00 AM
From: Mark Brophy   of 10309
 
Re: Revenues from royalties and developers tools.

If Wind River sells a million more licenses/quarter at $1.50 and the current run rate is $20m, revenues will only increase 7.5%. The company will lose money if they continue hiring 11% more people/quarter. I think you should take Wind River's word for it when they tell EE Times that they'll make their money selling developer tools because they know more about their business than us.

To put this in perspective, consider the leading PC BIOS company, Phoenix Technologies. They get $1.75 for each BIOS shipped in a non-Intel motherboard. They consider this a dead end low margin business that they've milked for all they can and are working on new products to increase the amount they collect from each PC. Phoenix also has a $20m/quarter revenue rate and is earning $13.9m/year (Wind River earned 12.9m in the last year).

Wind River and Phoenix have a very different business model than Oracle and Microsoft. Wind River and Phoenix devote 54-66% of their employees to R&D and 23-30% to sales and marketing, whereas Oracle and Microsoft devote 49-77% to sales and marketing and 14-33% to R&D. Wind River and Phoenix sell their products and services to technically sophisticated customers like Intel and Compaq and are successful due to technical superiority. Oracle and Microsoft sell to the masses in corporations where sales and marketing are paramount.

Could you post the URL to Allen Benn's web site?
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