Wind River going up, up, up! Message Board

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Technology Stocks : Wind River going up, up, up!

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To: Mark Brophy who wrote (1185)	5/31/1997 3:55:00 PM
From: Michael Greene	of 10309

>>Profits matter more than revenues. Yes, do we have some kind of disconnect here? That was the whole point of my comments on margins. Do you see profit margin as different than net margin? Profit has been on a strong uptrend along with revenue. It is currently running at 18% of revenue with plenty of reason (reread my last posting)to expect it to climb even higher. >>the company diluted the stock each time it purchased a company and made initial public and secondary offerings. You do not seem to be fazed by being repeatedly corrected on this point by others on this thread, but I will give it a try anyway. Since WIND has been a public company it has made one purchase of another company. This is the recent purchase of a small company, RST Software, which was purchased for something like $5 mil. With about $100 mil in cash and liquid assets this amounts to no more than one year of interest on this idle money. Since you seem to be the only one aware of the shopping spree that WIND has been on please enlighten the rest of us with some facts like the names and prices of companies purchased. Lacking this don't you think that it is time to drop this red herring? As far as public offerings go there has hardly been a long string of dilutive offerings. Beyond the 1993 IPO which all public companies have there has only been one secondary (1996) which increased shares outstanding by about 15%. While I am not a fan of share dilution it was a little difficult to get worked up about this secondary. The company only had two analysts following it and the secondary added two more banking relationships along with their analysts and some badly needed exposure. There also were only 12 million shares outstanding and almost half of that was closely held so the float was small, too small for many institutions. The secondary added needed market liquidity as well as swelling the company's coffers to almost $100 million. Investors should rightly be concerned about dilution but from this aspect WIND looks especially good today. With $100 million in cash equivalents, a large and growing positive cash flow and a management that has been consistently reducing expenses as a percent of revenues it is unlikely that there will be a need for another public offering for the foreseeable future. >>The stock was also diluted each time employee stock options were exercised and the company fulfilled the obligation by issuing new shares rather than purchasing shares from an existing shareholder. Someone correct me if I am wrong but wasn't this subject touched on at the last analyst call. As I remember management expressed concern about this issue and said that they had spent $2 mil to buy stock during the recent price drop in order to have it available for future option exercises (another astute WIND management move). Mark, I hope your short sales were not on the other side of these trades. >>The value of Wind River is the sum of the value of their tangible and intangible assets. The value of the tangible assets is $108.5m or $5.79/share. >>Wind River is in the middle of a period of high growth. It would be foolish to value the company at $5.79 merely because the value of the remaining assets is more difficult to measure. I could not agree more.

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