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

To: william binder who wrote (4464)	3/16/1999 11:57:00 AM
From: Ronald Paul	Read Replies (3) \| Respond to of 10309

Hi William, Some of my semi-educated thoughts on why WIND continues to suffers amid generally positive earnings, etc: 1) type of business - deeply embedded realtime operating systems are meant to be invisible to the end-user. If you print on a HP deskjet, you don't see, or think, "WindRiver Inside" although it is there. 2) Microsoft Threat - MSFT has been dropping hints for about a year now about getting into the RTOS business in various ways. Also, related to (1) above, MSFT already has a significant presence in the embedded OS market with CE. The big question in many investors minds is whether MSFT can bulldoze their way into the realtime niche. 3) Lack of clarity about market segment growth - No one really knows how the embedded market will evolve in terms of what percentage realtime systems will be necessary. Given that WIND's growth rate has consistently exceeded market growth rate, many analysts believe that WIND cannot continue its staggering performance. 4) Competition - There are a number of other OS's that can play in the realtime sandbox. Perhaps they don't have the integrated tool suite and support that WIND offers, but many of these OS vendors don't charge the high prices that WIND charges either. 5) Technology Innovation - this is one in which no-one on this thread has really given much discussion to date and is one area in which I hope some of the techies on this thread might contribute some thoughts to. Namely, what if some type of innovation in hardware or software suddenly poses a threat or windfall to WIND's strengths? For example, on the front page of the March 1 issue of the EE Times, there is an article titled, "HP lays planks for embedded's future." In it, HP talks about its newest approaches for automating development of electronic system architectures. The proliferation of "systems on a chip" whereby OTS cores are combined with ASICs into a superchip has been the most common method for semi-customizing deeply embedded systems. The problem with SOC approach has to do with the increasing investments in intellectual property for a given architecture. Another reality in this business are the enormous non-recurrng engineering costs associated with each application. The so-called follow-on product rarely requires exactly the same set of features, thus same set of electronics. With the splintered nature of the embedded marketplace requiring increasing customization, such investments requiring huge sales volumes to support it make it extraordinarily hard to turn profits. As stated in the article,' "Moore's second law says that the cost of this goes up by a factor of two every four years," Rau said. "Which means that your volume had better go up at least that much." Otherwise a company must amortize higher costs across a smaller volume of chips- an untenable situation.' If HP is successful and the idea takes hold in this industry, what ramifications will highly customized embedded CPUs have on OS and tool vendors such as WIND? Any thoughts from the formidable tech gurus on this thread are greatly appreciated. Cheers, Ronald Paul