I fault WIND for not seeing this coming.
Look at what they were saying last quarter -- that they saw no downturn coming, that their customers needed to invest in their own product development even in a downturn that was already well underway.
WIND's customer base is almost entirely the companies that were already being being hit hardest by this technology recession. So those companies did what WIND is now doing. If nothing else, the drop off in professional services -- now seen at 40% -- was inevitable.
WIND is now forecasting negative growth for at least quarter, with no visibility beyond that. They peg their forecast to the murky macro economic environment, and fuzziness of their customers' forecasts. Why did they feel entitled to visibility last quarter? I simply don't understand why they couldn't see it coming when the same conditions were already underway. Perhaps they were counting on a very swift V recovery, before the lag between their customers' downturn in orders inevitably became their own. In retrospect, it seems arrogant.
In the long run, does this make a difference? Probably not. It might even be positive, as the company may well benefit from lowered cost structure, the fruits of continued R&D, as well as pent up demand when the economy does finally recover; it probably will command a larger market share in a market space still in the cross hairs of megatrends.
Nonetheless, I've always had some difficulty in reconciling imputed projections for lily ponds with WIND's financial performance. To my way of thinking, I2O was the first lily pond 5-6 years ago. Even if I2O has produced "x" amount of royalties so far, not only is "x" a small percentage of what was hoped for, but as a percentage of a much larger WIND, it is even much smaller. How do we know that TIA, for instance, isn't in the same boat, immaterial for 5 to 10 years?
-Peter |
