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

To: peter grossman who wrote (7945)	6/8/2000 9:56:00 AM
From: KevRupert	Respond to of 10309

Peter, Your question, "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." That is exactly what I would like to know. Under promise and over deliver.

To: peter grossman who wrote (7945)	6/9/2000 2:57:00 PM
From: Allen Benn	Read Replies (1) \| Respond to of 10309

I wonder if you can shed some light on this question: why can't WIND unambiguously blow away the quarterly numbers? As Jerry Fiddler iterated and reiterated in the last CC, WIND is not the same company it was before the merger. What he didn't say was that the reasons for this go deeper than just the merger alone. A few years ago WIND grew organically, choosing market segments that seemed ready to sprout, and trying to avoid areas that were long on promises but short on actual revenues. You might remember WIND allowed MWAR to gain a prominent foothold in the STB space with their special-purpose DAVID OS, a huge effort for MWAR entailing development of a video authoring API among other complicated functions. Instead, WIND cultivated a relationship with the old NCI that turned into a broad presence in the market through work with LBRT. WIND worked similarly with OpenTV, thereby avoiding the heavy lifting to take on a complex subject like interactive TV or VOD. Early on, WIND stuck its toe in automotive controls by developing an OS for GM under contract. Until lately, continued efforts in that slow-developing area were tentative at best, best exemplified by the investment in 3Soft, a German software firm that focused on the auto sector. I2O was the beginning of the new WIND, as the company decidedly bit the bullet to get the technology developed, refined and deployed. No doubt that decision was greased by Intel's involvement and encouragement. The new WIND jumped all over Java, which has been slow to become a practical solution in the embedded world. WIND is the proud juggernaut in embedded Java, but at what cost? Everyone should have the sense that investments of this type have escalated to a whole other level, starting a little over one year ago with TMS and then again following the merger. WIND is attacking a number of important opportunities simultaneously, and clearly at great expense. They are acquiring technology, people and companies at an increasing rate. The resulting turmoil complicates budgeting, the expense side probably more than the revenue side. Expenses are hard enough to budget when all you have to do is estimate differences between a base year and the budget year. They are nearly impossible to pin down when there is no base year to start with, because so much has changed. Humans are poor at adequately identifying and estimating all cost factors, when all the factors aren't even known. Total costs are almost always underestimated in these situations. I suspect uncontrollable costs flowing from these kinds of complications account for most of the difficulty meeting their own earnings guidance. As the undisputed champion in the embedded world, WIND no longer has a choice about pursuing every major opportunity that surfaces -- and opportunities are surfacing like wildfire. The stakes are huge for the company that can dominate the emerging era of smart, connected devices, and what concerns you is exactly what it takes to win. This is what has changed at WIND, and it is good, albeit frustrating. I'll never forget H&Q's assessment of QCOM prior to its 26 times explosion. "The company has impressive IP but lacks earnings visibility, making it a hold." QCOM had to pursue a number of profitless businesses in order to seed CDMA. QCOM's operating profits were sub-normal up until the day everything started to come together. H&Q was allowing the frustration of watching QCOM scratch and claw its way into becoming a wireless standard interfere with the proper assessment of the value achieved. WIND has its sights set on a much bigger target than did QCOM. The need for investing in downstream technology will only increase in coming years, conceivably even faster than recent experience. WIND needs a formal means of empowering the Street to appreciate the value being created with these investments. I think WIND needs to inventory their lily ponds and provide associated metrics that can be used by analysts to estimate downstream benefits of each pond. Just as an analyst covering the drug sector never assesses a drug or biotech stock without mentioning the strengths or weaknesses of its pipeline of new drugs under development or in clinical trial, so too must analysts balance WIND's actual performance by anticipated harvests from its lily ponds. Allen