Wind River Sys Attracts Investor Confidence; Shrs Up
By Mark Boslet
PALO ALTO, Calif. (Dow Jones)--Wind River Systems Inc. (WIND) shares continued to climb for a third session Thursday, despite the day's market retreat, as the company rides Wall Street's "flight to quality," analysts said.
The maker of operating system software for embedded applications - such as inside an automobile or a Mars space explorer - has fundamentals that "are still very strong," said Hambrecht & Quist Inc. analyst Shelia Ennis.
The Alameda, Calif., company also is comfortable with third-quarter estimates for growth and earnings,said Chief Financial Officer Richard W. Kraber. Wall Street is projecting revenue of between $33 million and $33.4 million for the quarter ending in October, and earnings of 23 cents to 24 cents a share.
That compares with last year's third quarter, when revenue was $24 million and earnings were 18 cents a share.
The current round of upbeat investor sentiment contrasts with earlier this year, when holders feared Microsoft Corp. (MSFT) would quickly invade Wind River Systems' market. The software giant said in April that it would use its smallest operating system, Windows CE, to enter the embedded software market, injecting its software with new features by mid 1999.
In the succeeding months, some of the Microsoft fear has clearly worn off. But a number of other factors also have led several fund managers who have wanted to take positions in the stock to finally begin doing so, analysts and company officials said.
For one, the company portrayed confidence at recent investment conferences, said H&Q's Ennis. Equally important, investors perceive that Wind River Systems has opportunities to make gains over rival Integrated Systems Inc. (INTS), according to Richard Piotrowski, an analyst at Everen Securities Inc.
Integrated Systems, of Sunnyvale, Calif., missed Wall Street's earnings expectations when it reported second-quarter results last Thursday and during the quarter saw President and Chief Executive David St. Charles resign.
Given the uncertainty at Integrated Systems, Wind River Systems is in a good position to make competitive gains, especially when it comes to attracting new customers, Piotrowski said.
In addition, Wind River Systems also has brought on a new vice president of sales and is coming up with a new version of its development license, Kraber said.
Also helping the stock move higher is the perception that the Microsoft threat isn't on the immediate horizon, Piotrowski said. Microsoft has vowed to put "hard deterministic real-time" capabilities in its Windows CE - a feature that enables a high-priority application to demand and receive a computer chip's processing power when it needs it, he said.
It is unlikely that feature will be available in mid 1999, Piotrowski estimates.
Contributing to the stock's strength are short sellers apparently covering their positions, analysts said. Short interest in the stock had built significantly over the summer, rising, for instance, 41.2% from July to 1.9 million shares on Aug. 14.
Wind River Systems' stock has climbed from a close of 39 3/4 on Sept. 9 to reach a new 52-week high of 51 5/8 Thursday. The shares rose 1 5/8, or 3.4%, to 48 3/4 for the day - after rising 7.4% Wednesday - on Nasdaq volume of 1.1 million compared with average daily volume of 397,300. The Nasdaq fell 39.93 points Thursday. |
