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

To: Allen Benn who wrote (3113)	5/2/1998 10:27:00 AM
From: Mark Brophy	Read Replies (1) \| Respond to of 10309

Re: More on PC history I wonder if a full exposition of detailed, apparently accidental outcomes properly reflects the context in place at the time these momentous decisions occurred? I suspect individual personalities and seemingly random decisions were largely the inevitable consequence of techy-political turmoil in the early eighties, and by no means accidental or random outcomes. Yes, that's true. Our national champions owe their runaway success to a pair of Japanese innovations - manufacturing efficiency (high quality and low cost) and short-term sacrifices made in a long-term drive for market share. HP's legacy as an embedded systems supplier for engineering equipment gave them a focus on quality. So, they methodically tested DRAMs from all the vendors and they came to the conclusion to U.S. vendors were selling buggy garbage and the Japanese valued quality. Simultaneously, The Japanese tuned their fabs to produce at the lowest cost. The HP study was widely publicized and the Americans lost most of their market share. Intel laid off 1/3 of their employees and was forced to sell 5% of the company to IBM to raise capital to stay alive. Former Intel manufacturing engineer Paul Engel said it best at Message 4286834. In 1986, the Intel obituaries were being written and the final resting place was being selected...by the industry and Media pundits. You can read about Engel in the "Penang Burning" chapter of "Inside Intel". It's an interesting book, but it has an anti-Intel bias at times. Intel responded by making their top manufacturing guru (Engel's boss), Craig Barrett, the most prominent executive and eventually CEO. Today, Intel has no proprietary advantage and you can buy perfectly good Pentium clones from AMD and Cyrix. Nevertheless, Intel earns heaps of money and their competition loses heaps because of the manufacturing turnaround. The "Intel Inside" marketing campaign sometimes gets credit for their success, but it hasn't stopped IBM and Compaq from offering PCs with AMD and Cyrix processors. When I graduated from college in 1986, an engineer who aspired to enter manufacturing was considered as unambitious as a med school student who wanted to be in general practice. Thanks to the Japanese and Intel, manufacturing is extremely well paid and carries high status. And the ascendence of HMOs has elevated the importance of the general practicioner to gatekeeper for the entire medical system. Microsoft adopted the other Japanese practice of driving for market share regardless of cost. The best example of this is Windows. They started developing it in 1983 and was released in 1985. It wasn't successful until version 3.0 was released in 1991. It probably took until 1993 before they finally recovered all their accumulated losses. The trustbusters are harassing Gates even though it took him 10 years merely to break even! And all because a 4 year old company, Netscape, was unable to marginalize Windows with a product developed by 8 college students from the University of Illinois! Until Netscape came along, most of Microsoft competitors made the same mistake by refusing to defend their market share (Lotus, Apple, Novell, WordPerfect). They all wanted big profits now and had plenty of time to defend themselves. Lotus didn't update 1-2-3 for 8 years and refused to develop a Windows version! They thought marketing was more important than engineering and Bill Gates advised Jim Manzi to learn how to write a computer program. Borland also lost their 80% share of the desktop database market because they were late developing a Windows version. Interestingly, Intel doesn't share Microsoft's zeal for market share. They completely exited the promising cable modem business a couple of years ago because it's too competitive. They also allowed AMD and others to take share in the flash market. And it took them many years to challenge 3Com with cheaper Fast Ethernet NICs. Conversely, Microsoft doesn't share Intel's zeal to produce quality products. HP and their printer engine supplier, Canon, don't get as much attention as Intel and Microsoft, but they've been the other wildly successful beneficiary of the PC revolution. HP's experience has more useful lessons for Wind River, especially when you consider that VxWorks runs inside HP products. The technology in a printer is simple enough so that many vendors can participate and it's almost as fragmented as the RTOS market. HP had an early lead in laser technology and displaced the established printer leader, Epson. Wind River was the first RTOS company to provide a good development environment, and has gained market share over the established leaders, ISI and Microware. HP was successful because they combined high quality and low cost manufacturing with a focus on market share over short-term profits. An HP printer typically costs 10% more than the competition, but 50% of the market is willing to pay the premium for HP quality. If they charged a higher price, they'd lose share similar to IBM in the PC market. Or, if their manufacturing was bad as IBM's, they wouldn't earn a profit. Your I2O forecast is wildly overoptimistic. You've admitted in previous posts that it hasn't been adopted as fast as you expected, but now you've reverted to your previous irrational exuberence. It more be more useful to analyze the reasons for the slow adoption rate in servers before forecasting penetration in other areas. Check out the adoption rate of other Intel non-profits such as AGP, USB, and 1394.

To: Allen Benn who wrote (3113)	5/2/1998 5:29:00 PM
From: dougjn	Read Replies (1) \| Respond to of 10309

I'm brand new to this thread, and to Wind, but after reading around here for a bit I can say that the Benn/Brophy dialog reminds me of the Lincoln/Douglas debates. Wonderfully good writing, and an amazing education in the issues. BTW, I'm not generally given to saying things like that. This is a real high point on SI. And I like to think that some of the places I've been spending time on SI lately are some of its better spots, such as the Qcom, Lor, Gstrf, Psft, and Strictly Drilling threads. Rmbs is a bit more spotty. <gg> Got to go now, and get back to my reading. <gg> We are very fortunate to have you two. I'm sure I'll be back to pester with questions before too long. <gg> Doug

To: Allen Benn who wrote (3113)	5/4/1998 11:55:00 AM
From: Richard Karpel	Read Replies (2) \| Respond to of 10309

Allen, are you insinuating that WIND is going to be the next MSFT? I can imagine WIND getting to $10 billion in market cap (and I would be more than happy to settle for a mere 10-bagger) but I can't see it getting to $216 billion, the lofty heights at which MSFT currently resides. Before it gets to that point, Wind River Systems would have to become a household name and Jerry Fiddler would have to become a business tycoon celebrity. Forget the tycoon celebrity part of the quotient for a second, but I can't see how WIND -- whose RTOS is hidden deep inside embedded systems -- is going to become a household name. For that to happen, WIND would have to use its dominance in the RTOS space as leverage into other markets, like MSFT has done with Windows. So, did I read too much into your post, or do you really expect WIND to become the next MSFT?