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Technology Stocks : Wind River going up, up, up!
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To: mac who wrote (1883)9/2/1997 9:47:00 AM
From: Mark Brophy   of 10309
 
Re: Outsourcing as a business model

And at the first *hint* of a recession all the companies will pull the systems
in-house.. and sayonara Radisys, they'll be the first to fall. I've seen it.

Maybe you've seen it somewhere else, but Radisys has seen uninterrupted growth since
the founding of the company. Wind River was founded in 1984 and has seen a recession
every year except the past year. Every industry is seeing a trend towards outsourcing
and Wind River is dependent on the trend continuing, too. You shouldn't be invested
in the stock if you're afraid of a pullback to in-house development.

Wind River recent results:
Quarter Ending 10/31/96 01/31/97 04/30/97 07/31/97 Total
Revenue (millions) 16.6 19.8 18.4 22.0 76.8
Net Income (millions) 3.5 4.3 3.0 3.9 14.7
Net Profit Margin 20.8% 21.5% 16.0% 17.6%
Shares Out (millions) 28.0 28.2 28.0 28.4

Radisys recent results:
Quarter Ending 09/30/96 12/31/96 03/31/97 06/30/97 Total
Revenue (millions) 22.5 27.5 27.8 29.8 108.6
Net Income (millions) 3.4 3.6 3.4 3.7 14.1
Net Profit Margin 15.0% 13.2% 12.3% 12.4%
Shares Out (millions) 7.8 7.9 7.9 8.1

Wind River diluted their stock by 400,000 shares that have a market value of $16m,
which is greater than their profits for the year! It's a Worker's Paradise where the
employees have appropriated all the profits for themselves and nothing is left over
for Evil Capitalists like me.

Radisys diluted their stock by 300,000 shares that have a market value of $12m, so
the Evil Capitalist gets a $2.1m profit. And, the stock costs less than 1/3 of Wind
River for the privilege of earning a profit.

In order for Wind River to leave me with a $2.1m profit, the stock price would have
to be 32. Even at that price, it would still be 2.5x as expensive as Radisys for the
same profit.
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