Wind River Up; KeyBanc Says Linux Ops Helped 1Q, View
By Rob Curran
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Wind River Systems Inc. (WIND) rose as much as 23% earlier after the software and consulting company posted fiscal first-quarter earnings that beat Wall Street's views and boosted the lower end of its earnings guidance for the year ending in January.
"WIND's Linux strategy appears to be coming on line faster than we had expected," said KeyBanc analyst Brent Williams, who upgraded the stock to a buy from hold, in a research note Thursday. "We think the accelerating low-end market footprint layering on top of the company's ongoing franchise in higher-end real time/embedded operating systems, makes this an appropriate entry point to establish new positions."
Shares of Wind River recently traded at $6.07, up $2.59, or 19.2%, on volume of 2.4 million shares. Average daily volume is 780,036. The shares hit a 52-week high of $16.34 on March 8.
Late Wednesday, Wind River, Alameda, Calif., said it swung to a first-quarter profit of $1.9 million, or 2 cents a share, from a loss of $3.8 million, or 5 cents a share. Excluding items, the company posted earnings of 3 cents a share, a penny ahead of Wall Street's mark.
KeyBanc's Williams said winning certain open-source Linux software contracts during the quarter could lead to recurring revenue in a fast-growing area, which supplements the company's higher-end businesses.
Subscription license revenue rose 72% to $16.4 million during the first quarter and a rise in deferred revenue was largely driven by subscription business, Fulcrum Global Parterns analyst said Jamie Friedman, who reiterated a buy rating on the stock, in a research note Thursday.
Wind River has shifted much of its software sales into a subscription model and RBC Capital Markets analyst Garo Toomajanian estimates about 80% of all product bookings for the year ending in January will be subscriptions. These contracts, which span one year on average, minimize upfront investment costs for customers.
For the second quarter, Wind River forecast earnings, excluding items, of 5 cents to 6 cents a share, on revenue of $64 million to $65 million, compared with the Thomson First Call analyst peg for earnings of 6 cents a share, on revenue of $65.1 million.
Wind River now expects fiscal 2006 per-share earnings of 28 cents to 30 cents, on revenue of $267 million to $270 million, compared with a prior view of 27 cents to 30 cents, on revenue of $265 million to $270 million, and at least in line with the mean analyst estimate of 28 cents, on revenue of $267.3 million. |
