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Technology Stocks : Wind River going up, up, up!
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To: w2j2 who wrote (2995)4/4/1998 1:14:00 PM
From: Bargain Hunter  Read Replies (1) of 10309
 
Compete aggressively with Microsoft on price.

I disagree. There is no way WIND can compete with MSFT on price alone. Just compare MSFT's cash balance with the projected size of this business for the next several years. WIND must compete on value.

As of today, WIND is way ahead on value at the hard-real-time end of the RTOS business and MSFT is way ahead on the user-interface end. Basically MSFT has no hard-real-time value and WIND has no user-interface value. But as the market expands, the space in the middle is becoming more valuable: set-top boxes are probably the most visible example. Both companies would like to own that business and both are trying to achieve the necessary value. WIND's recent technology purchase is their attempt and MSFT's plan to add real-time features is theirs.

What will happen? Recent events in the cable industry suggest that the players are smart enough not to hand anyone a monopoly. That suggests that they will try to establish a competitive market by defining interfaces. And, yes, price will be a factor in that market. But only between products that are acceptable in other respects. MSFT isn't used to direct competition in the OS business. It's previous OS battles have always been at the application level. It'll be interesting to see how they do. Is the poor quality of their existing OSes because they are incapable of doing better or because there was no real market pressure to do so?

So what does all this mean for WIND, and the stock price in particular? For the short term it will probably depress the price. It is hard to justify the high multiple without high expectations for future growth. And many players are not ready to bet against MSFT. There will, no doubt, be some people who discover WIND because MSFT raises the profile of the industry, but I think that will prevent a major slide rather than fully support or increase the price. In the medium to long term it obviously depends on a combination of the real sales battle and the PR battle. So, as usual, everyone needs to do their due diligence and decide whther this is a buying opportunity or a good time to get out.
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