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Technology Stocks : Wind River going up, up, up!
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To: carolyn walder who wrote (594)2/28/1997 5:42:00 PM
From: Michael Greene   of 10309
 
The conference call was very positive. What most impressed me were a number of comments which when put together indicate that Wind River's business is heading in the direction of becoming a true franchise.

Tornado is growing rapidly and is on its way to becoming an industry standard. It now has over 8500 users with 30 % of these added in just the last quarter. This large amount of development activity will result in a flood of products which will use WIND's operating system and generate runtime license fees. As expected on this thread these revenues are accelerating. Last quarter the PROPORTION OF TOTAL REVENUE generated from runtime licenses increased by 20 percent. The difficult position that Tornado creates for WIND's competitors was underlined by pointing out that more than 40 man-years of engineering effort were put into development before its surprise introduction in 1995. Since then another 20 to 30 man-years have been added and WIND is continuing to invest heavily to maintain a big lead. In addition, WIND now has over 100 tools partners for Tornado. While Tornado is being enthusiastically received no competitor has any offering even remotely comparable. Catching up to all of this will be a daunting task.

Meanwhile, WIND's major competitor, Integrated Systems, has been struggling lately and it could get worse. The recently created Tornado Transition Kit which allows migration from Integrated Systems' PSOS to VxWorks has been receiving heavy downloads from the WIND homepage on the internet. INTS's announced competitive system has turned out to be vaporware and is no longer even being demonstrated to customers. It is worth noting that the Transition Kit strategy which WIND has devised to allow users, previously locked into competitors RTOS, to migrate to Tornado and VxWorks is not available to others to use against WIND. Jerry Fiddler pointed out that VxWorks is a superset of other's realtime operating systems. VxWorks has about 1500 function calls which is a magnitude greater than the others. Thus it is simple for WIND to create transition kits but would require many man-years to go the other way.

For those who have not heard the conference call there were a few forward looking statements of interest. Although the fourth quarter is always the strongest revenue quarter "blockbuster bookings" actually exceeded shipments adding to the already strong backlog. They stated that visibility into the first quarter was extremely good with the clear implication that they would have no problem meeting the Q1 estimates. Ron Abelmann also mentioned that he had asked analysts not to factor I2O revenues into their estimates for this year since the size of these revenues is not known. This at least partially explains why the analysts have shown a marked slowing in growth rate in their second half fiscal 1998 estimates. Expect a number of upward revisions as the year progresses.

This just seems to be a continuation of what we have been witnessing for the past couple of years - a strong story just keeps getting better.
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