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

To: Allen Benn who wrote (7939)	6/7/2000 9:56:00 PM
From: KevRupert	Respond to of 10309

egroup post from Don: The CS First Boston analyst report of 6/5/00 on WIND is now available through Schwab on-line for at least some brokerage clients. "...Establishing $66 Price Target: Fundamentally, this is a 25-30% sustainable growth story. Our 12-month price target of $66 is based on an 8x multiple off CY02 revenues. Recommend purchase ahead of the upcoming analyst meeting on June 19th..."

To: Allen Benn who wrote (7939)	6/8/2000 1:37:00 AM
From: cfoe	Respond to of 10309

As far as I know, there is no accounting requirement that WIND prorate pre-paid royalties, for the very reason you mentioned: there is no obligation to deliver anything further. First, a disclaimer - it has been years since I donned my green eyeshade. However, I believe the above statement is not completely accurate. I mention this because how pre-paid royalties are treated can affect earnings. If the royalty is a one-time payment and is deemed earned when received with no future obligation then it could properly be recorded as revenue 100% when received. However, even if there is no obligation for future work, but the royalty continues based on future sales by the licensee, the prepaid royalty would usually be matched to the licensee's sales and therefore would be recognized by the licensor (WIND in this case) over time. This would be so even if it were a fixed and non-refundable royalty pre-payment. Now, if the licensee decided halfway through development of the product to abandon it, so no more royalties would be expected, the licensor could then advance the recognition of the pre-paid royalties. In the end, a company's auditors should make sure that revenues are matched with tie in an appropriate manner depending on the circumstances. As I said, it has been years since I dealt with this stuff, but it is how I remember things.

To: Allen Benn who wrote (7939)	6/8/2000 9:41:00 AM
From: peter grossman	Read Replies (2) \| Respond to of 10309

Allen, I wonder if you can shed some light on this question: why can't WIND unambiguously blow away the quarterly numbers? -- no one time gains, etc. Personally, I was encouraged by last quarter's report because they are slowly reporting more important metrics, and because they are slowly revealing the fuller story -- presumably in clearer detail to analysts -- as they gain increasing competitive advantage. But they are increasing expenses by 50+% while revenues are increasing 34%. Twenty-two percent of revenues pretty much fall to operating net, which means they are running the rest of the business at a substantial loss. I would presume that the royalties are relatively easy to forecast, except for those verticals which are truly in late, late summer -- and those, if any exist yet, can only help. And, they've done a good job of managing expectations. Have they simply decided to risk making their numbers by prioritizing development and other expenses ahead of profits to gain even more later, and/or are they simply missing internal forecasts which are actually rosier than public ones? Seems to me that they (we) can have it all -- exceed revenue and profit estimates while increasing investments in product development and selling as soon as a number of verticals mature. Will we start hearing projections and actuals for I2O and TMS, and others to come? In the meantime, wouldn't it be preferable to unambiguously make the bottom line number and use the increase in stock currency to buy what they need?