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Technology Stocks : Wind River going up, up, up! -- Ignore unavailable to you. Want to Upgrade?

To: lkj who wrote (6536)	10/22/1999 6:41:00 AM
From: Don Lloyd	Read Replies (2) \| Respond to of 10309

Khan - (...If talents are the only thing that we are after, $400 million for 200 engineers is a hefty price. I remember that Cisco placed its office right across street from IBM to steal talents from IBM. If WRS is really superior to ISI, attracting 200 ISI engineers should be a lot easier than spending $400 million. (I know that attracting 200 ISI engineers is more easily said than done, but $2 million per embedded software engineer is over priced.) And for the $400 million we spent, there is no guarantee that the top engineers and managers at ISI will stay...) The nominal market value of ~ $400M is not the correct metric. The real economic cost to WIND of the merger is what alternative actions are precluded because of the merger. If actual cash were spent, then the amount spent could not be used to buy something else. In this case, all that is being spent are pieces of paper that represent WIND ownership, which do not preclude further WIND actions of any sort. In actuality, INTS is apparently being acquired in exchange for an about 50% increase in WIND shares. This would reduce a $21 WIND share market value to $14 IF INTS were to be valued at an absolute zero. At the other extreme, IF the INTS revenues were sustainable and were as valuable as WIND revenues, then the WIND share market value would be doubled from $14 to $28 as the total revenues would be about doubled. Neither extreme is reasonable in and of itself, and the expectations of future operational results will determine the market value, as always, in the long run. Regards, Don

To: lkj who wrote (6536)	10/22/1999 11:11:00 AM
From: contax	Respond to of 10309

>>If WRS is really superior to ISI, attracting 200 ISI engineers should be a lot easier than spending $400 million. << Khan, Don't forget that apart from getting the engineering talent, WRS is also getting their sales force. A sales force that must obviously be very good to be selling $150 million dollars worth of an inferior product to a lot of buyers. Now this sales force will also have the opportunity to sell a vastly superior product to satiate the appetite of a very hungry market's voracious appetite for embedded OS. Also, keep in mind my other point: By gobbling up it's biggest competition, WRS will instantly have greater pricing power. If you recall, WINd had to lower it's pricing model just a few months ago to help them compete against the likes of ISI. And that was one of the reasons the stock took a hit in the summer. Regards, Karim

To: lkj who wrote (6536)	10/22/1999 11:46:00 AM
From: Mark Brophy	Read Replies (1) \| Respond to of 10309

Sales is more important than engineering. Wind River has 181 people in engineering and 324 in sales. ISI has 229 people in engineering and 310 in sales. A substantial portion of their time in the past has been wasted trying to persuade potential customers that their products are better than those of their biggest competitor. The merger will fix that and be much more efficient. However, I disagree with Karim that the merger will give pricing power. The RTOS industry remains fragmented and competitive. And roll-your-own remains the market share leader.