It is beginning to look like I20 sales will be ramping up at the end of this year which means Wind will not see revenues until this quarter a year from now.
I didn't mean to imply that. I2O shipments are starting to ramp now, probably mainly with RAID controllers and as additions to high-end server motherboards. What I meant was that if I2O proves to be popular in NIC's, then the numbers will ramp much faster starting next year.
Also, what is the deal with NT 5.0 not supporting I2O?
I'm not sure where you got that impression, but I believe it is wrong. Refer to the July 23, 1998 description by Microsoft of Windows 5.0: microsoft.com
In particular, note the following statements:
ADDRESS THE NEEDS OF THE LARGEST, MOST MISSION-CRITICAL ENTERPRISE ENVIRONMENTS.
Building upon the strengths of Windows NT Server 4.0, version 5.0 will offer substantial improvements in scalability through further SMP optimizations, intelligent I/O, and larger memory capacity on 64-bit processors.
KEY FEATURES IN BETA 1
Windows NT Server 5.0 Beta 1 contains many important new features that will make it the preeminent server operating system well into the twenty-first century. The advanced capabilities of the Active Directory, Dynamic DNS, Microsoft Management Console, and many, many others will provide the ultimate tool kit for developing and deploying enterprise applications. The following table details the key features included in Beta 1 of Windows NT Server 5.0:
Then, down under Scalability and Availability:
I20
The I2O architecture uses a dedicated processor with its own memory to off-load I/O processing from the main CPU(s). This results in lower CPU utilization and greater throughput.
You may have gotten the impression that Windows NT 5.0 would not support I2O from an otherwise excellent analyst report from Everen Securities dated June 23, 1998. The report contained the following paragraph:
The risk to our analysis regarding increasing I2O revenues for F2000 is related to whether Microsoft ships the I2O operating service module, as a standard part of Windows NT 5.0. Currently, we do not believe that this will occur, since the market for I2O enabled products is far from being established. As a result, we have assumed a minimum amount of I2O revenues in F1999 ($1 million) and F2000 ($5 million). Furthermore, since Microsoft appears to be acting in such a predatory manner towards Wind River (by making announcements of virtual "hard" real-time products), we are puzzled about the rationale to ship a service module that clearly benefits the market perception and valuation of Wind River. Hence, the risk to our analysis is an upside risk on I2O royalty revenues rather than a downside risk.
Lots of things have changed since June 23rd. I guess the upside risk is going to happen.
By the way, Michael Kwatinetz, the analyst with Deutsche Bank who moved the stock significant a few weeks ago on the basis of an upgrade from Accumulate to Buy, made an interesting point in his report dated June 24, 1998:
Worries about increased competition in the RTOS space notably from Microsoft's CE and NT, have been partially responsible for the recent share weakness. While MSFT is a formidable competitor, and should never be under-estimated, we would like to point out that MSFT's products are not real-time capable. At the earliest, we believe MSFT will have a first generation product sometime next year, and that it will take several iterations to bring its real-time functionality close to Wind River's level. Even if MSFT achieve this, the larger footprint (e.g. memory requirements) will likely make CE and NT unsuitable for over 90% of RTOS applications.
We believe MSFT's focus will be on segments in the embedded market where it can leverage its branding, i.e. where the user interface is a critical function. This is especially true in the consumer space (which is currently around 5% of Wind River revenues). And even in this space, we believe Wind River will compete effectively given partnerships with companies like Javasoft and Zinc, and its growing customer base.
I think all these points have been made previously on this thread, but its nice to see them from analysts that influence the market.
Allen |
