My conference call notes:
This is my notes taken from the conference call:
Tom was pleased with the quarter. The quarter had outstanding revenue growth. The shortage in the bill to bookings ratio was anticipated. The sales staff is always emphasizing the 4th quarter, and not the 1st quarter.
The biggest issue was the integration of the acquisitions. Research and development was emphasized for the quarter. The quarter had higher operating costs due to an increased hiring of engineers and acquisitions costs.
An ongoing goal is to increase operating margins. There are 73.1 million fully diluted shares. There is $337 million in cash. A $5 million line of credit was paid off. The Liberate stock's price decline, which was similar to the NASDAQ decline, assisted in the marketable securities market value decline. The currency impact was irrelevant, less than $300,000.
Tom went on to say that the integration is going well. There was a strong top line growth caused by 1) efficient sales staff, and 2) strength in markets they serve. The challenge will be to put in place the infrastructure to handle sales. The company wants to handle $400 million in sales & eventually $1 billion in revenue.
Tom went on to say the network business is going strong. Odyssey is helping in the consumer space.
The Sun announcement today doesn't contribute immediately to revenue, but puts wind in discussion with important players. wind will be part of some very important discussions and meetings due to this announcement. wind is part of the executive committee. wind is the only software company that is part of the committee.
According to a survey, wind has over a 50% share of the Java embedded market.
There were 847 design wins for the quarter. Tom indicated that, in his talks with international business executives, wind is perceived as a substantial enabler.
Jerry discussed the 3 acquisitions: 1) ISI, 2) EST (the hardware is allowing wind to assist earlier in the customer cycle), and 3) Odyssey (the focus upon internet appliances was discussed).
The whole is greater than the sum of the parts. The company is is very different and much stronger than even 6 months ago.
Tom is comfortable, Q2 & forward for this year, with a 37% revenue growth rate for the full year. Operating expenses still need to account for key product developments, and integration expenses. He is comfortable with First Calls estimate of 51 cents for the year. The company is making excellent progress, and execution is the key to the success of the company.
Questions
Tom feels that a 20% operating profit margin level can be achieved in the latter half of 2002. It is increasing steadily, as it is in the high teens now.
The 847 design wins indicate the competitive landscape indicates winds leadership. Although the competition in specific companies/projects exists, the company is generally strong in all markets.
There are over 50% new licensees of the 847 design wins. The new licensees are new customers, many based in the San Francisco area.
The sales force integration is going well. Synergies, territories, and quotas are established and are going well. Surprisingly pSOS & VxWorks had about equal design wins.
Embedded Support Tools revenues were not broken down individually (it would only be for 1-month and domestic operations only if it were broken down separately.)
Tom indicated there were large proprietary wins. He wasn't willing to share names of the companies, since some of these companies still have internal issues to address with their own products. I believe Mr. Benn mentioned this issue in detail regarding Cisco. This is just my comparison and not from the conference call.
The book to bill ratio was a little below parity due to Q4 being the quarter that the sales staff has historically pushed the hardest. This issue was stressed that this was anticipated and not of concern.
Tom was not willing to discuss hiring (sales staff) plan for the year. There are, however, 600 sales/field engineers out in the field globally.
Revenues were broken down as follows: 1) 64% in N. America, 2) 19% in Europe, and 3) 17% in the Asia/Pacific (high proportion in Japan). The platform business unit was over 60% of the revenue base.
The DSL (Tornado), cable, and servers are attracting a lot of business for wind. winds products are allowing for a faster time to market. Digital cameras, mp3 players, internet nuts & bolts, and automotive (which is changing rapidly) all played a part in winds success. Networking definitely has traction.
On the competitive front, the market is clearly on the upswing. There is a compressed design cycle, and companies want an established player. They want to know, who are they doing business with? wind is becoming a powerful company. wind will spend $70 million in research & development this year.
License vs. royalty: $20.6 million of revenues (22%) were royalties. There is a trend that the product line is becoming complex and sophisticated, and companies are willing to pay royalties for this rather than purchase royalty-free products that are simple in design. If they don't pay for royalties, then they fall behind the competition.
Linux embedded hasn't made a lot of progress, although there is a lot of talk about this issue.
Odyssey has had near term wins in the consumer space. Internet appliances, IP phones, telephony, and smart cards are growing very fast.
A side note: a company GoReader was discussed. It makes a product, the ViewReader that can store 1-year of textbooks for college students on it. It is a wireless device that can highlight text. Students don't pay for expensive textbooks, but rather download a whole year of books once a year. This concept wasn't even imagined not too long ago.
The next conference call will be Thursday, August 31st, 2000.
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