Re: Risks described in 10-Q.
You should check the IPO prospectus for the best description of the risks.
Award doesn't need to worry about IBM and Compaq using their own BIOS because the increasing complexity of system software makes it increasingly worthwhile for PC vendors to out-source BIOS development. The trend will not reverse itself. Instead, Award needs to worry about Phoenix Technologies, which recently received contracts from Compaq and IBM for all their BIOS development for desktop machines. In addition, the big vendors such as IBM and Compaq are gaining increasing market share over the small vendors that are supplied by Taiwanese motherboard vendors. Award is strong with the Taiwanese and Phoenix is strong with the big vendors.
Interdependencies are a double-edged sword. Award recently recorded big revenue increases partly from new customers and partly from increased sales of existing customers. Award is unlikely to lose customers, but it's also very difficult to displace competitors in existing customers. SystemSoft has been preoccupied with their SystemWizard product line and Award has won some of their BIOS and PC Card customers, but it won't be easy to repeat that success. In general, the second warning is accurate, except that Award has stolen the Compaq Armada PC Card contract from SystemSoft.
Award doesn't need to worry about OS vendors such as Microsoft. There's plenty of engineering that needs to be done at the system level. The third paragraph is mostly boilerplate, although it's possible that in the future, Intel may gain greater market share with their motherboards. There has been a trend lately at Intel to make it more difficult for PC vendors to differentiate their products, although Intel motherboards haven't yet increased market share. Phoenix has the Intel BIOS contract.
Customer acceptance of interconnect standards such as USB and Firewire (IEEE 1394) have been slower than expected and have impacted results negatively the past few quarters. Microsoft is including USB support in Windows 98 and Award and Phoenix should gain significant revenue increases from peripheral vendors, a market they hadn't penetrated in the past.
The historic strength of the company has been in desktop PCs, so they could fail in any attempt to develop successful products outside their core expertise. You might want to check with the company for a revenue breakdown by product line. The embedded x86 market has been exploding and there are too many opportunities for Award, Phoenix, and RadiSys to pursue. So, failure in this area is unlikely. Award bought Mr. BIOS last year and they specialize in the x86 embedded market. |
