MontaVista pioneered embedded Linux, but could watch the spoils fall to rival Wind River if it fails to consolidate its leadership, suggests a BusinessWeek special report. MontaVista must solidify its financial footing and grow faster if it hopes to keep ahold of markets it helped create, the article says.

According to BusinessWeek, Wind River's decision to enter the embedded Linux market two years ago offered MontaVista its first serious competition. Wind River fell behind Microsoft in embedded market revenues in 2005, but is still better established in the embedded market than MontaVista, with $235M in sales in 2005. Wind River is also publicly traded.

MontaVista was founded seven years ago, and according to BusinessWeek, has since consumed “most, if not all” of its $75M in venture funding. CEO Jim Ready reports growth rates of about 20 percent annually — a rate described in a BusinessWeek quote by embedded market analyst Chris Lanfear as a “red flag” for a company as small as MontaVista. Analysts estimate 2005 revenues between $30M and $40M for MontaVista in 2005, according to the article.

Ready is confident MontaVista will achieve profitability in 2006, BusinessWeek reports. However, the long-time embedded market pioneer and technical visionary is currently involved in helping find his own replacement — he will step aside to the position of CTO, a MontaVista board member confirmed last month.

Additionally, MontaVista is involved in a restructuring involving an undisclosed number of employees, BusinessWeek says. One source (not BusinessWeek) close to the company says the company has shed 21 US employees so far this year, although VP of Marketing Peder Ulander told LinuxDevices several weeks ago that departures so far have been voluntary, and related to “resource reallocations” that shifted emphasis away from some internal projects. “Naturally, as a result, some folks moved on,” Ulander said.

Rapid proliferation of Linux in the high-growth mobile phone sector could help MontaVista — MontaVista claims to have provided the OS used in every currently available Linux smartphone, according to the BusinessWeek article. However, the article also suggests that MontaVista's mobile phone customers — which include the likes of Motorola, Panasonic, and Samsung — could switch to a competing product from Wind River with little trouble. In fact, BusinessWeek says, “big handset makers are hedging their bets, using some Linux from each, analysts and customers say.”

Despite competition, and management changes, MontaVista may still be poised to become the next pure-play Linux public offering and open source success story, a kind of Red Hat of embedded, BusinessWeek suggests. Alternatively, if Wind River continues to gain momentum in embedded Linux, MontaVista's fortunes could founder.

The embedded market is currently valued at about $1.5B per year, but could grow to $6B in time, BusinessWeek suggests. The full story can be found here.

 
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