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

To: Richard Karpel who wrote (2989)	4/3/1998 1:04:00 PM
From: J. Kerner	Read Replies (1) \| Respond to of 10309

New Coverage by Everen Securities: *WIND RIVER SYSTEMS (WIND $38 «) RATED 2-1 INITIATING COVERAGE OF THIS PROVIDER OF INTEGRATED SOFTWARE DEVELOPMENT TOOLS W/ A 1-1. OUR FY'99 AND '00E EPS ARE $0.84 AND $1.17. OUR TARGETS ARE $45 AND $60. DETAILS TO FOLLOW. Anyone with an account at this firm? Would be interested in their detailed report, although their EPS estimates are fairly close to other analysts.

To: Richard Karpel who wrote (2989)	4/4/1998 1:47:00 PM
From: Allen Benn	Respond to of 10309

For MSFT, the most significant benefit of the Windows monopoly isn't the $50 they get every time a PC is sold. It's the leverage that Windows provides that allows MSFT to dominate other markets (i.e., word processing, spreadsheets, presentation graphics, etc.) as well. Can Wind leverage VxWorks in the same manner? How? A characteristic of deeply embedded systems is that generally they are fixed, possibly subject to upgrades, but not much in the way of add-on applications. Embedded Internet Devices based on Java could enable more dynamic application flexibility, which conceivably could be leveraged to magnify revenues--even for devices lacking involved user interfaces. But the most likely mechanism of leveraging applications will remain systems that implement the PC paradigm, whatever the form factor and whatever the coding language. These non-PC systems include hand-held computers (PDAs), AutoPCs, many smart phones, and possibly exotic versions of TV/PC or set-top boxes. WIND's current objective is to provide the building blocks to enable companies like Spyglass or NCI to make the software to drive these kinds of systems, as well as traditional embedded systems. This means WIND is not situated to benefit from the kind of leveraging Microsoft does, whether or not the device intrinsically lends itself to user add-ons. Wind will have to make money the old fashioned way, by selling product licenses, run-time licenses and services. Fortunately, many billions of devices will need operating systems. I suggest you should ask not how WIND can leverage VxWorks, but how MSFT can leverage Windows CE in deeply embedded systems? MSFT can do it in PDAs, AutoPCs and TV/PCs, but they can't do it in 99.9% of embedded systems that presumably might use Windows CE-- any more than can WIND. While the potential for growing revenues with this business model is mind-boggling for WIND, it is small change for MSFT. Microsoft needs to add $3 billion dollars in revenues next year, $4 billion the next, ad nauseum. That's why I claim Bill is obsessed about applying the PC paradigm to other devices using Windows CE, and has little interest in deeply embedded systems. That's why Windows CE 2.0 still lacks many features demanded by the embedded systems community; it was never designed with embedded systems in mind. It started life as a lite Windows 95, with compatible but just lighter applications than found on a desktop. This is also why Microsoft will have their hands full trying to get Windows CE to meet a completely different design specification (needed to satisfy the embedded systems community) while preserving the original, more important design thrust. Microsoft has always excelled at hauling along legacy requirements, so as to never (almost) isolate an installed base. However, this time a primary specification is small and scalable, which conflicts with Microsoft's traditional approach of huge and intertwined. This time hey can't brute force their way through and cover over their inefficiences with RAM. Maybe riding on top proven RTOS's is Microsoft's best way out of a tight box. Allen