Steve and others:
I'll take a stab, since I also happen to have been a Citrix investor last summer. If you recall, Citrix had just spiked in one day from 18 to 35, after having fallen from over $50/share in the months before.
"50 to 12: Reason for the fall": In Feb. 97 announced "potential plans" to create their own remote access software, rather than license the technology from Citrix.
"17 to 35: Reason for the spike": Microsoft later announced that they had changed their minds. They would not compete with Citrix, and instead would exclusively license their technology for the next 3 years, pay a large upfront payment to further bolster the technology, and pay royalties on licenses with NT.
I bought the stock, figuring the technology was now endorsed by the market leader, and Citrix had a big cash payment to boot. I watched the stock soar to 59, sold, and watched it keep on soaring. Even with the recent tech volatility, Citrix closed at 84 (42 split adjusted).
The Citrix saga has a number of interesting technology implications for WIND. As usual when Microsoft is involved, some are good, and some are bad.
Citrix is one of the market leaders in remote area software. Essentially, Citrix software turns older PCs, such as x386 and x486 computers into NT terminals. Today's announcements with Hewlett-Packard's medical products group and Philips Electronics NV are probably for deals within corporate headquarters. The technology partners, Websonic, QNX Software Systems, Bryant Computers and Symbol Technologies Inc (SBL - news) seem directed at extending the current functionality of Citrix's software. QNX Software is the privately held embedded tools company that Allen has alluded to, and suggests that Citrix is attempting to put intelligent processing at the core of their architecture.. I'm not familiar with the others, but will do some research later tonight.
Citrix calls their independent computing architecture protocol "a standard for thin-client/server computing that enables the deployment of Windows-based applications in an enterprise" Citrix's sales and profits demonstrate that they are finding a market for their software today. In essence, they (and by extension Microsoft) are providing an NC alternative.
<<Under the licensing agreements, Citrix granted the companies the right to embed its independent computing architecture protocol technology into a range of products, including embedded operating systems, Windows-based terminals, medical equipment and wireless, handheld devices.>>
This also smells of Microsoft, particularly the extension into wireless and handheld devices. Citrix is helping Microsoft stake a claim in the "NC vs PC" battle, by providing corporations with a network cost saving methodology today. Companies continue to argue that one of the downsides to PCs is the cost of ownership, both in maintenance and rapid obsolescence. Citrix Software helps to answer the obsolescence question, and gives Microsoft an important foothold in this space.
How does this impact WIND? First and most obvious, it continues to challenge the Oracle/NCI relationship. We can argue all day about the relative merits of the NC platform vs. the networked PC. Certainly there are others on the thread like Dave and Allen that have better technical understanding of the software. Whether the promise of Java over networks can be delivered remains to be seen. I am admittedly undecided about Java's success, and I suspect the market is as well. For that matter, I suspect the the players themselves (SUN, WIND, ORCL, and MSFT) are also confused as to how the landscape will shake out. Each have their own agenda, but "Everyone vs. Microsoft" roughly describes the battlefield . Technological superiority will play a role in the outcome, but like other high tech struggles, so will marketing, financial power, first mover advantage, and luck.
However, there are also good implications for WIND. Lots of them.
Regardless of who wins the remote access battle, WIND will profit from remote access itself. The more remote access, whether by Citrix of NCI, the more need for intelligent routing of information.
As Allen has alluded to many times, WIND has a virtual lock on this space. It is impossible to make a phone call without using VxWorks. Soon, traffic over digital networks will resemble phone networks, with more and more processors using Vx works. More traffic over remote networks will require more routers and switches, many of which already use VxWorks. Many more will use it more in the future. I2O will play an important role as well. Larger networks require more I/O, and I2O should certainly capture this space. It is afterall the industry's solution .
Finally, the Citrix saga has a number of valuable strategic lessons for WIND, not least of which concerns the inevital battles/partnerships with Microsoft. Citrix learned not to be bullied by Microsoft, despite the threat of class action lawsuits, and eventually wound up staring down the giant. Nine months later, Citrix is finding a way to co-exist with the Evil Empire, and I suspect WIND eventually will as well. Despite our fears, the future of computing really is big enough for more than one player. WIND will likely become the monopoly of embedded computing, based on its commanding penetration already. But Microsoft will also be a power for many decades to come. Over a year ago Allen pointed out that I2O was not only a solution for Intel, but will help to push NT as well. I suspect we will see more partnerships in the future.
As always, any and all thoughts appreciated.
Regards,
Jason Cogan |
