Re: Other companies
The fact is I wish RSYS all the success in the world. I wish all of WIND's customers success, and a lot of other companies, too.
Radisys is more like a distribution channel for VxWorks than a customer. They've sold multiple customers the Wind River product, but they now have a product of their own that adds hard real-time capabilities to WinNT and they're selling it to the same customer base. If a Wind River salesman sold pSOS, he'd be immediately fired. It's a significant event when your channel switches allegiances.
My point was that relative past performance is insufficient for judging future performance. So even if I was to grant that RSYS has been performing spectacularly relative to WIND, then that is not nearly enough to warrant an investment.
That true. However, you're an outsider and can't know everything about the companies you invest in. For example, you don't know the exact royalty rate of IxWorks or the reaction of potential customers that might help you to project future IxWorks revenues. All you have to go on is the projections from Intel, which might be biased. If projections are optimistic, Intel can negotiate a lower royalty. To a large extent, your investment is an act of faith in the management. Past returns are an excellent piece of info in your quest to determine whether management is capable of producing good returns in the future. A long history of superior returns is the reason Warren Buffett and Bill Gates can demand a higher P/E than the likely future returns of their enterprises would indicate.
I believe it takes the special talent of a gifted investor, such as yourself, to sort through these issues in the sector RSYS has chosen to do business. For all these reasons, I defer to your wisdom concerning RSYS, and I wish you success with your RSYS investment.
I no longer own Radisys. I bought shares with idea of holding them for a long time, but the market gave me a great return in a short time, so I cashed out and bided my time and waited for other opportunities in the embedded systems area. The money Wind River borrowed has also propped up the price of Wind River lately, so you might consider fire sale alternatives.
An important Wind River customer, Electronics for Imaging (EFII), recent suffered a 60% drop due to a product transition "hockey stick". They didn't defer any previous revenue, so they have a big temporary shortfall. Make sure that you speak to the IR rep personally and check out the great view from their office on the top of a San Mateo hill.
Xionics Document Technologies (XION) is suffering from fallout of the big EFII drop (both make printer software), even though they don't have the same problem. Xionics has the same investment bank as Wind River and has enough deferred revenue to report 40% growth for the next 3 years. EFII wouldn't have dropped so far if they need money as much as XION and WIND and received outstanding investor relations advice!
Award Software sells a product that allows VxWorks customers to make Win32 calls. This helps Wind River to compete with Radisys. In addition, they have a base business that is similar to your SystemSoft investment and they don't have a speculative product such as SystemWizard. They went public 14 months ago at 8 and are currently selling at 8 ¬ despite a long history of strong growth. |
