In my opinion, WIND management has done an outstanding job of focusing the company on increasing market share. They are guided by Fiddler's vision of creating a new kind of company, a full service embedded software company. They are performing very well on their plan.
Hello Peter,
I think otherwise on the WIND management, and Fiddler specifically. Under his vision, WRS has gone out to acquire and develop many system level solutions. The excitement of entering many new markets has left the company exposed to extreme risk. The problem is that 1) some of these markets don't exists and 2) even if they do, WRS doesn't have the pricing power it expects. Going forward, I see some solution groups folding into others to make better economic sense.
I would also like to point out that the situation today is similar to the fiasco of 1999, although it's better handled this time. For one thing, TSD is not thinking about leaving as RA were.
How you could see this shortfall coming?
1) The macro environment of networking. With all the warnings from Cisco, NT, and LU, WRS' biggest market was in trouble.
2) Worsening the problem is that WRS' software tend to sit more in the latest telecom products. The new generation equipment makers such as Sycamore and Copper Mountain were in a MUCH worse situation than the CSCOs and LUs
3) Adding in the large number of dieing telecom startups, WRS' telecom market was going to be in big trouble.
The above three are fundamental events that you, me, and the management knew 5 months ago. Yet the management thought it could sail through this tough time. It pulled something out of its cookie jar two quarters ago, by having that big one time pop in royalty to meet revenue. With the huge pop in royalty, I would expect that earning to increase dramatically. But it didn't, a clear sign that business is weakening.
The royalty pop is a confession from the management that the marco environment is hurting WRS in a fast and drastic way. The nail on the coffin was Elmore's selling. Elmore has always shown buying and selling WIND at the right time. As a board member, he may not know as much as Fiddler, but he knows more than we do.
When you add everything up. Yesterday's event was not a bit of a surprise.
Regards,
Khan |
