MontaVista Software ended its 2003 fiscal year with revenue growth of 77 percent over the previous year, it says, producing 500 design wins for the year and becoming cash-flow positive in the fourth quarter of 2003, ahead of plan. By the end of 2003, MontaVista Software had experienced 15 consecutive quarters of growth, and had increased revenue 12-fold since 2000, despite a challenging global economy, it… says.

As a privately held company, MontaVista is not obliged to make its financial numbers public. However, the company says it is “comfortable” with numbers from analyst Steve Balacco, of research firm Venture Development Corp. (VDC), who estimates MontaVista Software revenues for 2002 at “about $17.1 million.” If true, this places MontaVista's 2003 revenues at close to $30.3 million.

“I told you so,” commented MontaVista Founder and CEO Jim Ready. “After all the abuse we had to go through — from embedded people who thought Linux would never catch on, and also from Linux people who doubted us — and through a lot of hard work, it's abundantly clear that we've emerged as the leader in embedded Linux. We thank our customers.”

Analysts: MontaVista an early leader of potentially large industry

Last year, VDC ranked MontaVista Software first among commercial embedded Linux companies worldwide, based on market share. In Japan, the Fuji-Keizai Group, a leading provider of market and industry information, reported last year that MontaVista Linux garnered almost half (46.3%) of embedded Linux projects in Japan, while capturing almost two-thirds (63.4%) of the country's embedded Linux revenues.

In August 2003, Gartner Inc. sized the annual Embedded Software Tools Total Available Market at close to $1 billion. In its survey (2002 Worldwide Embedded Software Tools Market Share, August 14, 2003, Nancy Wu and Daya Nadamuni), MontaVista Software was listed among the top embedded OS companies.

The MontaVista — Wind River “rivalry”

Concurrent with MontaVista's rise to profitability in the years since 2000, some traditional embedded software companies have struggled. Wind River, the world's largest embedded software company, also reported positive cash flow for its most recent reporting period, and recently appointed a new CEO. However, the company has lost $579 million since January 2000, and has seen revenues decline from $438 million in fiscal 2001 to $249 million in its last full year ended in January, 2003, according to the Associated Press.

Some have suggested that Jim Ready's drive to succeed with MontaVista is motivated in part by the wish to square accounts with Wind River, a former competitor that outstripped Ready's first company, Ready Systems, in the embedded OS and tools market. Wind River began as a customer of Ready Systems, selling its VxWorks development tools around Ready's VRTX OS. “VxWorks is short for 'VRTX Works,'” suggests Ready.

Later, “business disputes” led Wind River to develop its own kernel and move away from VRTX, according to Michael Barr's Embedded Systems Glossary.

Ready says he has nothing but respect for Wind River, however. “Dave [Wilner] and Jerry [Fiddler] were good customers, good engineers, and they worked hard, and I don't begrudge Wind River its success. They helped us promote VRTX,” notes Ready.

Still, Ready sounds exuberant when discussing Wind River's recent strategic shift to support embedded Linux. “Even Wind River can no longer continue to deprecate Linux. When a company like Wind River supports embedded Linux, it isn't because they want to. They've been forced into the position of supporting Linux.”

Unlike Wind River, which supports embedded Linux in addition to its royalty-licensed proprietary OS VxWorks, MontaVista touts itself as a “pure Linux play.” Says MontaVista, “By providing a foundation with rich high performance networking, a robust and reliable runtime environment, and an unparalleled collection of development tools, utilities, and deployment components, MontaVista Linux has easily displaced a broad range of legacy, proprietary embedded OSes.”

More growth metrics

Ready reports that MontaVista now counts 200 employees, 40 of whom are offshore. “We have two and a half offshore development centers,” notes Ready. “A big one in Moscow, and we just opened one in Beijing — so much for the cold war, eh? And we have a support center in India.”

The company has counted 1200 customers since being founded, according to Ready, who adds “We're not in danger of running out of customers.” MontaVista customers include Samsung Electronics, Siemens, Alcatel, Nortel Networks, Volvo Mobility Systems, Toshiba Personal Computer, Mitsubishi Electric Company, Toyota Communication Systems, Lucent Technologies, Motorola PCS, Motorola Broadband Communications Sector, Caspian Networks, MEN Micro Elektronik, UTStarcom, Iskratel, Datang Mobile, and Thales.

MontaVista design wins for 2003 included the first Linux-based mobile phone from Motorola; a home server from Sharp; a telematics application from Volvo; an AdvancedTCA telco platform from NEC; a universal remote control for the home from Philips; and a broadband terminal and a broadband TV tuner from Panasonic. There are also several brand name High Definition Televisions running MontaVista Linux available to consumers.

MontaVista is especially proud that the T-Engine Forum selected MontaVista Linux as the preferred Linux platform defined in the T-Engine software architecture. MontaVista says, “Working together with the T-Engine Forum, MontaVista Software will propose a joint solution, combining the long-dominant Japanese embedded OS, TRON, and embedded Linux, benefiting the Japanese electronics industry at large.”

MontaVista also appears to be on the vanguard of an industry move toward the Eclipse platform for cross-vendor development tools integration. Ready recently became a founding member of the board of directors of the newly independent Eclipse foundation, joining executives from IBM, INet, Ericssen, SAP, Serena, QNX, and HP. MontaVista launched its Eclipse-based DevRocket tool in November, 2003.

Ready reports that MontaVista's 1200 customers have payed for some 4,000 MontaVista Linux developer seats, with that figure rising “on a wonderful growth curve.” Still, Ready suspects that even more copies of MontaVista's development environment are actually in use. “Our licensing is elastic, and that's okay, at this point,” he says.

Dave Warner, MontaVista's chief financial officer, sums up 2003 this way: “We achieved positive cash flow in the fourth calendar quarter of last year, a milestone for us and the embedded Linux market. For the year, our staffing increased to about 200 people worldwide, productivity improved, gross margins improved, and operating expenses stayed flat. Our results reflect the market telling us that we are the safe bet when it comes to using Linux for embedded devices.”

 
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