>How is this predatory monopolistic behavior when Microsoft doesn't have a
>monopoly on the embedded market and, in fact has market share in only one segment?
Microsoft used their monopoly in PCs to bully their way into the embedded space and sign up lots of partners with an operating system that would be the joke of the town by any other vendor. They then shook the sector by announcing vaporware, causing the stock prices to fall uniformly. Clearly, Microsoft expects decision-makers either will wait for the improved Windows CE or switch to the current, inadequate version, knowing an improved version is in the works. This is an abusive display of monopoly power, even though Microsoft does not have a monopoly in the embedded systems sector - and never will.
The fascinating consequence of Microsoft's elephantine action is to weaken secondary players in the embedded systems space while making WIND's market position stronger than ever. Microsoft has effectively forced everyone to focus attention on strategic alliances. While some decision-makers will lean toward the Evil Empire, most will side with the only proven and capable alternative, or try to straddle the fence. There is a growing sense that aversion to Microsoft's strong-arm tactics is spreading across many technology sectors. H&Q has mentioned it in analyst reports; Sun, NCI, IBM and Oracle harp about it incessantly; the DOJ is poking in a every corner; and Ron Abelmann was defiant in responding to the Wall Street Journal.
>What leverage do you think they used to get the TCI set-top deal and how could that
>be applied to other customers?
I believe Bill Gates personally flew in to meet with Malone and his troops in a round-robin negotiating session-at Gates insistence. It turned out to be impossible for Malone to tell Bill to blow off after Bill just invested $1 billion in TCI. Also I'm sure you saw the picture of every media mogul in the country gathered at a power conference at Bill's new house a while back, including Malone and even Warren Buffett. Microsoft can apply incredible pressure to force a deal.
>when time-to-market pressures are one of the huge drivers in the move toward
>COTS RTOSs, why would anyone wait for a product that's at least a year away
>and, based on past experience, will fall short of expectations technically?
Things aren't quite that black and white. First, Microsoft's message tells decision-makers to use Windows CE wherever it can be squeezed in, because an improved version is on the way. Second, it tells decision-makers not to organize strategically around a non-Windows CE RTOS, but just dilly dally around until the Windows CE standard is available. A year in the life of a product company is not such a long time.
The actual effect of Microsoft's vaporware announcement should be the exact opposite of their intent, namely, to consolidate embedded systems around WIND.
>What do you think Wind's next move is? The H&Q tech conference is at the
>end of the month, then Wind has their own Developer's conference on May 11.
I don't expect WIND to hype the stock at the H&Q conference, but, like last year, they can easily move the stock price just by stating how business is doing. Once again, money managers are worried about weakness in the sector due to Asian turmoil, competitive pressures or whatever. They also know they can trust whatever Ron says about business conditions.
Expect Intel to emphasize I2O at the WIND conference mid-May. That could excite some developers, which in turn could be conveyed to the Street. Also, by that time, the Street should be aware once again that the quarter will be met, and bid up the stock in anticipation.
Per usual, I don't expect earnings to exceed the 15 cents expectation by more than 2 cents. Prior to or during the earnings announcement I would expect something significant out of WIND. Mitchell is looking forward to an automobile announcement. That would be fine with me.
>I think it is time to become more visible, at least for the sake of their investors.
I think we would all like more visibility, but WIND is an embedded systems company, which by definition means you can't see it. Visibility is almost an oxymoron. Nevertheless, I would like to see something like "Powered by Wind Tools", "Same as Sojourner" or "Tornado Power" to know that VxWorks is inside. If I saw two smart telephones from NT, and one said "Same as Sojourner", that's the one I would buy. Ditto for printers or anything else. In fact, I have yet to find a consumer product in which anyone I ask or call knows what OS is inside, or even if there is an OS inside.
But if you mean that WIND should do more to expose analysts and money mangers to the potential of I2O or anything else, then I don't think I agree. With 6,000+ design wins, WIND could tell stories about potential that would be mind-boggling, instantly boosting the stock price, but that would be wrong. It would be wrong not because it misleads, but because it would add to volatility.
WIND's job is to churn out consistent, high-growth quarters - like it has for over four years without a blip. If you want to see what steady performance like this can bring in time, look at KO or G, and then compare their respective growth rates to WIND's. If the Street believed WIND will not trip en route to consistent earnings, its P/E ratio would be determined on the basis of economics, and would be at least three times higher than today. Consistency pays.
Allen |
