NEW YORK, Nov. 20 /PRNewswire/ -- Standard & Poor's today assigned its single-'B'-minus rating to Wind River Systems $140 million 5% convertible subordinated notes due 2002 (Rule 144A). A single-'B'-plus corporate credit rating was also assigned to the company.
Alameda, Calif.-based Wind River's ratings reflect its small, but growing, market position and technology competence, offset by a limited product
portfolio and an aggressive growth strategy. Wind River develops software
operating systems and development tools that allow customers to create real-
time software applications for embedded computers. Prospects are good, as
costs for embedded computers continue to decline. Also, the gradual shift
from in-house developed systems to commercial ones due to increased
complexities provides time to market advantages. The company's products
support multiple platforms, focusing on 32 and 64 bit processors, while its
installed base contributes renewable revenues from license and maintenance
fees. New initiatives, such as products to process input/output functions,
programmable digital signal processors, and embedded Internet devices could
provide meaningful longer-term royalty fees. However, sales cycles are long,
technology risks are high, and operating results could be affected by
purchasing patterns of customers and competitive conditions.
Wind River's substantial leverage (debt exceeds fiscal 1997 revenues by
about two times), is partly offset by its good operating profitability, with
operating margins in the 30% range. For the nine months ending Oct. 31, 1997,
the company grew its revenues 46% (from the prior-year period) to $64 million
and net income 71% to $12 million, but is still a small participant in its
industry, with competition from several larger companies. Funds from
operations to total debt is expected to be in the 20% range. Current
liquidity is strong (at about $235 million of cash) due to proceeds from the
note and prior equity issue, but could decline as the company pursues its
growth initiatives.
OUTLOOK: STABLE
The outlook anticipates that Wind River will continue to improve its
market position and financial profile. The company has adequate financial
flexibility to fund its growth strategy. However, upside potential is
currently constrained by the challenges of developing innovative products in a
very competitive environment and managing expected growth. -- CreditWire
SOURCE Standard & Poor's CreditWire
/CONTACT: Philip Schrank of Standard & Poor's, New York, 212-208-8843/
/Web site: ratings.standardpoor.com |
