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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: the hube who wrote (16647)	1/27/2000 11:46:00 PM
From: Uncle Frank	Read Replies (1) \| Respond to of 54805

Re WIND, thanks for a great report, John. I've been interested in this stock for some time, and appreciate you jogging my failing memory. Can you comment on Mr. Market's recent lack of regard for this fine company? Regarding timing of entry into a potential pongid, I think many of us are leaning towards earlier involvement based on positive feedback from our prior efforts. Time will tell if we've become overconfident, but so far all of our consensus picks have done very well. I just love wind's margins <vbg>. uf

To: the hube who wrote (16647)	1/28/2000 12:02:00 AM
From: Joanne Fishman	Read Replies (1) \| Respond to of 54805

Hi, John, Thank you for that terrific report! I printed it out to reread in the morning. --Joanne

To: the hube who wrote (16647)	1/28/2000 12:29:00 AM
From: TigerPaw	Read Replies (1) \| Respond to of 54805

WIND Existence of hypergrowth? Not yet. Revenues are growing at about 40% per year, so they definitely are not in a tornado yet. This is a field I have been in for 25 years. I don't see how a tornado could form. The end consumer base (embedded software developers) is just not large enough and is not growing fast enough to form a tornado. One good year could saturate the market. Margins are likely to be high, it's only moderately cost sensative. TP (Great Post and kudos for your research) Edit - Maybe I missed something on first reading. Do they get a royalty for each item shipped instead of a one time fee per product? That could make a big difference in my opinion.

To: the hube who wrote (16647)	1/28/2000 3:28:00 AM
From: StockHawk	Read Replies (1) \| Respond to of 54805

Excellent report on Wind, John. An interesting company. I took a look at the link to the financial information. It seems that while year over year sales were up the last 3 quarters, EPS were flat or declining. Did you uncover a reason for that? Thanks StockHawk

To: the hube who wrote (16647)	1/28/2000 3:29:00 AM
From: FLSTF97	Read Replies (1) \| Respond to of 54805

Wind: Project Hunt Report Thanks for the nice report John. I've been watching wind ever since Tom St. Denis jumped from a (lucrative) position at AMAT to head up Wind. I've been trying to understand his motivation since despite the remuneration package he got from Wind, he must have left several million on the table at AMAT. One thing I liked in their last 10Q was the following: The increase in product revenues was due primarily to an increase in run-time license revenues, as customer developed products continue to be accepted by end-users, and to the expansion of our product lines resulting from research and development and the integration of products from acquired companies. If they are to become Microsoft like, it will be through ever greater run time license revenues. Thanks again for the write up. Fatboy

To: the hube who wrote (16647)	1/28/2000 8:27:00 AM
From: Eric L	Respond to of 54805

John, Your WIND report was excellent. Thank you. I took a reasonable position in Wind in October and enjoyed a quick 90% return before I sold in late December when they started trending against the market. I think that the tornado for embedded OS is still a ways away, and I was uncertain if WIND is the primary candidate for gorilla status in that arena, although I still think they have the potential to be. I have them on close watch and continue to attempt to keep abreast with the category. I think they deserve further discussion. - Eric -

To: the hube who wrote (16647)	1/28/2000 11:45:00 AM
From: Guy Hillyer	Read Replies (1) \| Respond to of 54805

Regarding WIND A big reason for MS Windows' lock on the OS market is the fact that so many applications are written to use that OS's interfaces. People who want to use all those applications don't have much choice -- they have to have Windows. So all the end users have Windows, increasing the incentive for app developers to write their applications for Windows. We all know how that works. However, in embedded systems, the end user doesn't choose an operating system. Each embedded application brings along its own operating system. So the very powerful incentive of fitting into an ubiquitous environment doesn't seem to exist for the authors of embedded applications. So the incentives to use vxworks are that it's robust and a lot of embedded systems designers are familiar with it, and maybe some big companies will standardize on it. I'm not sure that would qualify it to have a gorilla-like lock on its market. Maybe I've missed a key point? -- Guy Hillyer

To: the hube who wrote (16647)	1/28/2000 5:48:00 PM
From: KevRupert	Respond to of 54805

John, Excellent analysis on WIND. I thoroughly enjoyed it and will take some time to decipher it all out. Thanks for your time and effort. It's appreciated by all. advalorem

To: the hube who wrote (16647)	1/31/2000 1:10:00 AM
From: Snowshoe	Respond to of 54805

John, nice report on WIND, but I'd like to comment on what you said about the revenue growth rate... >>WIND is growing its revenues at approximately 40% per year<< This was true for FY97-99, but in the first nine months of FY2000 revenue growth fell to 27% and earnings growth flattened as stated in the 3rd quarter report... Revenues for the first nine months of fiscal 2000 were $117.7 million, a 27% increase from revenues of $92.7 million in the same period of fiscal 1999. Excluding the charges mentioned above, operating income for the first nine months was $25.3 million, compared to $25.5 million for the corresponding period in fiscal year 1999. Also excluding these charges, net income was $18.4 million or $0.42 per diluted share, compared to net income of $17.6 million or $0.40 per diluted share for the first nine months of fiscal 1999. biz.yahoo.com WIND shareholders (myself included) are hoping to see improvement in the growth rate after the merger with INTS is digested.

To: the hube who wrote (16647)	1/31/2000 6:42:00 PM
From: om3	Read Replies (2) \| Respond to of 54805

Wind River vulnerable to open source solutions John, as you mentioned in your excellent report on Wind River, they are potentially quite vulnerable to open source real time operating systems. The first such that I was aware of was Cygnus's (recently bought by Red Hat) eCos system: cygnus.com They say they currently support ARM7, Fujitsu SPARClite, Matsushita MN10300, Motorola PowerPC, and Toshiba TX39. The OS itself is completely free with no licensing or per unit royalty charges. They hope to make money selling tools to configure, test, and write applications for eCos. It also appears that several embedded Linux projects are gathering steam. Cygnus is behind EL/IX, an attempt at standardization in this space. From: eet.com "EL/IX would also allow developers to use desktop Linux software to build embedded applications for Linux or on eCos, Cygnus' real-time operating system. Cygnus founder Michael Tiemann is hoping that factor will lure developers from traditional RTOS vendors like Wind River Systems Inc." From: eetimes.com "Developers of embedded-Linux systems established some common ground at a gathering last week, as they laid the foundation to build common threads among their various efforts and also decided to back Cygnus Solutions' EL/IX as a common applications programming interface (API) for embedded Linux. Nearly 100 developers and programmers tended the grass-roots Real Time Linux Workshop here last week, and all but one voted to proceed with the use of EL/IX as their API." Another entry in this space is Lineo which just released Embedix Linux: lineo.com I don't know the extent to which these developments are having an effect on Wind River but at the eCos presentation I went to they argued that companies developing embedded applications are extremely price sensitive when it comes to per unit costs and that is why the bulk of them are still rolling their own RTOSs. In that context, it would seem that a decent open source solution might be extremely attractive to them. --Steve

To: the hube who wrote (16647)	3/1/2000 10:06:00 AM
From: hueyone	Read Replies (1) \| Respond to of 54805

WIND Thank you for your excellent report on WIND, John (post 16648). I carefully listened to the WIND conference call yesterday afternoon and I will briefly come out of lurk to share a few notes from the call. The conference call is available to replay as a web cast at videonewswire.com 1. WIND's new mission statement is to "Become the leading provider of reliable, innovative software solutions for connected smart devices." 2. Jerry Fiddler, the founder of Wind, sits on a think tank panel with some Lucent and Motorola guys. The panel expects there to be over one trillion connected smart devices in the future. (I don't know how soon this future will arrive.) 3. WIND and ISI combined for over 1000 design wins in the fourth quarter. Revenue per design win is increasing. (I do not not know whether this will give WIND the revenue and earning's growth that Uncle West is looking for. Stay tuned.) 4. WIND (and ISI?) spent more on R@D last year, 50 million, than their nearest competitor had in revenues. (Obviously they do not consider Microsoft as a competitor.) 5. The purchase of EST this week will allow WIND to integrate hardware solutions with software solutions, for example in the "Tornado for Managed Switches." These solutions will be higher margins than stand alone software solutions. 6. WIND will also sell tools allowing customers to build their own RTOS if they wish. WIND feels providing the tools for making OS will get WIND's foot in the door to provide total solutions to these customers at a later date. 7. WIND will also develop a Linux department to provide solutions incorporating Linux in those cases where a customer wants this solution. WIND feels however, that Linux based solutions will be appropriate for a much more limited market than their main products. 8. WIND expects more and more businesses to use WIND's total solution services rather than developing in house RTOS since "time to market" has become more and more critical for companies in this fast paced internet world. 9. WIND is moving towards a single "standard platform" in the next 12 to 18 months. Emphasis will be on reliability, scalability, adaptability and portability. (Please don't ask me to define.) 10. From the way the marketing director talks and names the products, I suspect he has RTFM. All for now. I don't want to take up too much bandwidth. Disclaimer: I am a newbie. I own a small amount of WIND. Regards, Huey

To: the hube who wrote (16647)	4/9/2000 11:04:00 AM
From: the dodger	Read Replies (1) \| Respond to of 54805

John, Just read your great report on WIND. (what can I say? -- next week I plan to take down the Christmas tree(g)) Just a couple of questions/comments. Question: I saw no mention of RadiSys (RSYS) as a competitor. Was this an oversight? Or am I misunderstanding something about RadiSys? From Yahoo 'market profile' site... "...RadiSys Corp. develops, produces and markets embedded computer applications used by OEMs for products in manufacturing automation, telecommunications, medical devices, transportation, and test and measurement industries. For the fiscal year ended 12/31/99, revenues 35% to $251.1 million. Net income totaled $19 million, up from $7.8 million..." Comment: Technology such as programming tends to move from the simple towards the complex due to the 'virtuous cycle'...eloquent programming demands higher processing speeds and memory...so higher processing speeds and memory are made available, which leads to even more eloquent programming, and so on and so on... Right now, most OEMs are still doing this programming 'in house'. (I believe you estimated 85%.) I think there are several forces that are working together that will change this. You alluded to most of these -- I'm just attempting to tie them all together. 1. The desire for even more sophisticated programming. And if you're a start-up company making cell phones, you don't want to allocate precious VC money towards a giant in-house programming department -- you want to make cell phones. As the off-the-shelf programming base grows, so does it's level of sophistication. 2. Integration. We're entering the "blue tooth" mentality age of technology. Every product is expected to communicate and understand every other product. The industry is silently screaming for a standard, and the dominant player has the best chance of becoming that standard. (Plus, if your in-house programmers make an integration mistake, your product could be 'dead meat' before it reaches to retailer's shelf. Why chance that?) 3. Cost: Always a big factor in any product, and off-the-rack will always be cheaper than tailor-made. Imagine writing your own O/S just to sell a computer. Twenty years ago when options were limited, the answer was 'yes' or 'maybe'...but today -- 'never'. 4. Time-to-market. A product's date with obsolescence is continually becoming shorter. Custom programming not only requires a lot of money -- but it take a lot of precious time. Even if I'm wrong about all four of these points, I think WIND can still be a big winner, assuming they just hold on to their share of the embedded market as it naturally expands. The estimates I've heard is a ten-fold increase in something like five years. If WIND, in addition. can capture a substancial portion of the current in-house business -- which I think they will -- revenue/earnings could be explosive. Thanks again for your time and effort putting the report together. "the dodger"