Ronald - I don't think the Microsoft CE announcement is behind WIND's recent price erosion. WIND has been underperforming the market for almost a year now, long before there was widespread discussion of CE.
I think what's happening is that WIND is still growing earnings at the rate of 40-45%, and it's being repriced by the market, so that its PE is more in line with its growth rate.
Roughly speaking, a company that grows earnings 40-45% deserves a PE of 40-45. One could argue that WIND deserves to trade at a premium due to its consistent, predictable performance and its dominance of the RTOS space, but that premium is worth only so much. Right now, it's worth about 15 extra points on the PE.
The 100+ PE we saw last year seems to have been the result of irrational I2O exuberance. That isn't to say that I2O won't pan out, but that too many people expected to see I2O revenues too quickly.
Unfortunately, right now the market prefers hyper-growth to consistency, and WIND is paying the price.
By the way, my wife also prefers hyper-growth, so Ron (Abelmann, that is) -- for the sake of my wife -- let's drop the predictable "WIND beats estimates by two cents" game for the next quarter or two, and report some of those deferred revenues Allen has been talking about. |
