"The problem with looking at unit growth as a predictor of royalty growth, is that you can bet that WIND's customers negotiate a sliding scale, where as unit shipments go up, per-unit royalties go down."
My understanding is that these royalty rates are generally negotiated up front. It is true that a lower value, higher volume product, such as a cable modem, would probably have a lower per unit royalty than a high value, low volume product, such as an optical switch, however I believe that over the life of a product, the royalty rate should remain relatively constant.
I also think that the increased royalty rates for "second generation" RTOS are primarily for providing software that sits on top of the RTOS (such as TMS), and not for the RTOS itself. Given this, it would seem that WIND should be able to achieve these second generation, per unit, royalty rates(but probably not the market shares forecasted), even if linux were to become the dominant RTOS.
For me, the bottom line is that, at the current price, WIND appears to be a good value. Even if they don't totally dominate the post PC era, they will be a significant player in a huge market, which should provide years of price appreciation. Month to month the price may fluctuate significantly, but IMO, the trend will be up and to the right. |
