What earnings warning?
Did you experience a weird feeling that the dreaded earnings warning conference call was strangely upbeat? What I heard is that WIND may make their prior guidance of 6 cents, but for sure they will make between 4 and 6 cents. It was evident that the pluses favoring WIND in a down technology economy cannot fully compensate for the minuses, as management hoped. Yet, with reduced revenues they may still come close to earlier guidance.
The company has finally succumbed to the tough but necessary requirement to rationalize the merger with ISI and a bunch of other, smaller companies and technologies. Although hard on the rank and file, the move is a positive for investors and the long-term viability of the company. Dollars to donuts WIND will continue hiring needed technical workers even while redundancies are being eliminated in areas such as administration and sales. The sizeable layoffs will jump-shift WIND’s operating margins to levels more in line with times past once revenues begin to reaccelerate.
But, if the company actually might make its earnings guidance, why the warning, even though revenues will be down? BTW, this is the first warning WIND ever issued, even though it missed at least two or three quarters over the last couple of years. What’s different this time?
The answer is pretty obvious and TSD did everything but yell it out at the conference call. That’s why the call was so uplifting, the opposite of what I expected to feel.
In my opinion, the real reason for warning is that WIND has a major product announcement that will be uplifting the stock price, and feels an obligation to clear the decks of any near-term bad news before making the announcement. The date of the announcement is today or tomorrow. The site of the announcement is the Network Interop trade show in Las Vegas. The product to be announced is something related to the IP mega trend I posted on the other day. In particular, Storage over IP, SCSI over IP (iSCSI), offloaded TCP/IP NIC, or some such thing. It is big because WIND is optimally situated to put the following server technologies altogether around IP: BSD Unix, iRAID, iNIC, managed switch/router using intelligent network processors and TMS, iSCSI (never announced before now), I2O and Infiniband.
I don’t have any inside information, nor am I just guessing. I just realized the product announcement had to be the driver of the warnings and looked around. This is what I found:
Wind River is very excited to be announcing the launch of a NEW networking product at N+I!
Be one of the first to hear the news and visit our booth for more details.
And apparently this doesn’t include iSCSI, since it is mentioned separately. In any case, I think the following link tells the tale:
windriver.com
Allen |
