David - I think that the press releases have been intentionally confusing regarding the source of funding for the acquisitions. As business finance is not my forte, someone with more knowledge can correct me if I make some blunders.
In the February 2 press release regarding the Object Software purchase, Ablemann states:
"Under the terms of the agreement, Wind River has acquired 100% of the stock of OST in a transaction to be accounted for as a purchase. As a result of the acquisition, Wind River expects to incur a one-time after tax charge of approximately $3.7 million in the fourth quarter of fiscal 1998, which ended on Jan. 31."
This leads me to believe that this will be charged against fourth quarter earnings, not the convertible bond $$. He goes on to state:
"This acquisition, and our recently-announced partnership with Network Computer, Inc., are very important strategic applications of the capital that Wind River has raised over the past year and a half. Our fourth quarter is progressing well and, excluding these charges, we expect our revenue and operating profit for the quarter to continue the excellent performance that we have experienced over the past 15 quarters."
Although it is implied that he is referring to the bond offering as the "capital" it is not explicit. He also again refers to the charge against Q4 earnings. The same approach was taken with the NCI/Navio announcement. In that press release Ablemann states:
"Under terms of this agreement, Wind River will recognize a one-time charge of approximately $10 million related to certain direct and indirect acquisition costs and related expenses in the fourth quarter of fiscal 1998." ...."In July 1997, Wind River participated in a highly successful convertible debenture offering which enhanced the company's cash position by approximately $140 million. It was stated at the time that a major use would be to acquire companies and technologies which are strategic to the company's continued success. This partnership represents precisely the type of opportunity that we wanted to be able to financially afford. Our fourth quarter business remains robust and, excluding this charge, we expect our revenues and operating profits for the quarter to continue the fine performance that we have experienced over the past 15 quarters."
Again it is implied that the bond money would be used, but the facts as stated are that the charges would be to earnings.
Therefore, it seems to me that management wants to leave the impression that the bond money was used for the acquisitions (after all, that was one of the purported uses). I believe that WIND management has chosen their words very carefully and with a direct purpose. It is up to us as investors to decipher these statements and act on them as we see fit (i.e., buy, sell or hold).
Any comments?
Carolyn |
