>Do you know why WIND is not able to generate sufficient profits
>from their current products to support the growth?
Why do you think that? WIND generates plenty of cash to fuel internal growth, with lots left over. Don't confuse selling shares with needing cash for normal operations.
But don't take my word for it, look at annual reports. Operations generated $12,255,000, $12,644,000 and $1,426,000 in fiscal years ending January 1997, 1996 and 1995. It is extremely unusual for a high-growth company to generate any cash from operations, much less cash to this extent. This is true even for a company that is highly P&L positive like WIND. (The reason has to do with accruing revenues versus facing cash outlays for most expenses).
Capital expenditures reduced cash generated from operations by $6,647,000, $2,180,000 and $1,293,000 in FY 1997, 1996 and 1995, respectively. Finally, sales and purchases of Treasury Stock, ignoring the major secondary of last summer, was about a wash.
What all this means, through FY 1997 and so far this year, is that WIND has been able to fund its superb growth internally without needing additional capital, including the secondary offering of last summer. WIND has gone to the financial market because it wants a full war chest, expecting bigger and better things to come. It has not sought financing because its current operations consume cash.
The reason WIND has been able to be cash-flow positive is that it is able to operate with net profit after taxes now approaching 18% on an annual basis. Only a few monopolies do better. In addition, WIND is extremely conservative about recording revenues, so its P&L translates into cash better than most comparable companies. For example, I2O royalties will not be booked each quarter based on quantity shipped, but rather on actual invoices to Intel for the past quarter's reported shipments, which will usually lag the quarter by one to two months.
Now you know, WIND never needed the cash from the secondary offering, much less the $140 million from the recent convertible, in order to continue growing as they are. The stated reasons for obtaining the money is to enable WIND to begin construction of a WIND complex in Alameda, capable of housing around 1,200 employees after the turn of the century, and to be able to make opportunistic technology investments. The $250 million in WIND's war chest, coupled with their leadership position, makes WIND the major player in the embedded systems sector.
Allen |
