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

To: umbro who wrote (9024)	1/4/2001 1:30:52 AM
From: Allen Benn	Read Replies (1) \| Respond to of 10309

A design win usually consists of product sales, possibly an obligation for professional services, support and maintenance, and possibly a certain amount of prepaid royalties. The sale counts when the product is shipped, but only appropriate amounts are accrued at the time the deal closes and the product ships. By and large, most product license fees would accrue on the date the product is shipped. Minor prepaid royalties would accrue when the product ships. Significant royalty pre-payments are accrued on a pro rata basis over the expected life of the deal. Once pre-paid royalties, if any, are worked off, subsequent royalties accrue usually on a quarterly basis or they might be negotiated on a follow-on prepaid basis and again prorated. VAR agreements typically require quarterly reports to determine units shipped and, by extension, accrued royalty. Professional services are accrued on a work completion basis, while support and maintenance fees are strictly prorated over the life of the contract. Since WIND is primarily a product company, signing a design win and shipping the products brings in significant sales immediately; albeit they are often matched by even more significant sales from downstream royalties, add-ons, services, etc. Downstream royalties have extremely interesting statistical properties that have persisted as far back as WIND has data, but I’m not comfortable detailing anything specific about them here – especially since I have no knowledge that ISI’s royalties display the same characteristics. Most analysts are comfortable knowing WIND follows conservative accounting procedures regarding booking revenues. Nevertheless, they always show interest in tracking DSOs as an indicator that any given quarter still is too heavily back-ended. Allen