Allen:
I agree with most of your points about WIND needing GUI capability, and the general good sense of aquiring the Netscape technology and stamp of approval. A couple of questions for you:
1. How do you see the future generations of NCOS playing out? Is it possible that WIND will now find themselves both a competitor and partner to NCI's own vision, creating conflicts down the road?
2. What do you think of the price tag? How did WIND arrive at the number ($10 million), and do you think they got a better deal given the recent Asian technology weakness and sag in Netscape/Oracle stock?
As for J. Kerner's question regarding WIND's recent stock weakness, I have my own theory to go along with your short seller attack, 13G filing rationales. Here goes:
With the aqcuisition, WIND will now post a nominal loss for the first time since their IPO quarter in 1994. Although management has gone to great lengths to make this acquisition transparent, the fact remains that the tape will read:
"WIND RIVER SYSTEMS posts 4th quarter 4-6 cent/ share loss after one time charge against earnings."
WIND's stock normally moves unexpectdly around earnings announcements, given the poor analyst coverage and general market mistrust of extremely small, extremely fast growing companies. Many of the money managers who own the stock have at best a cursory understanding of WIND's business. This was evident to me from my recent attendance of the DMG technology conference in Laguna Nigel, CA.
My fear is that the reality of a nominal loss, as evidenced by Ron Abelman's statement, is leading to the recent selling. Money managers are selling in advance of this announcement. In essence, they are saying: Why wait for a potential market misunderstanding of the number? Better to take money off the table now.
What do you think of this rationale? Also, what do you think the market's reaction will be in February, assuming current market levels and no further Asian deterioration? I encourage everyone to present thoughts on this issue.
Regards,
Jason Cogan |
