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Wind River reports strong year, lowers guidance

Mar 6, 2009 — by Eric Brown — from the LinuxDevices Archive — views

Wind River reported strong fourth quarter and fiscal year 2009 revenues, but showed higher than expected 4Q GAAP losses, and offered lowered guidance for the next quarter and fiscal 2010. Wind River's 4Q Linux bookings, meanwhile, grew 48 percent year over year, says the company.

Revenues for the fourth quarter of fiscal 2009, ending January 31, totaled $88.4 million, up five percent from the $84.3 million of the previous year's 4Q, says Wind River. However, there was a net fourth quarter GAAP loss of $4.4 million, compared to a net loss of $2.0 million from the previous 4Q, with a net loss per diluted share of $0.06. The losses — higher than analyst projections — were said to stem in part from a goodwill impairment charge of $12.2 million, implemented in response to both the recession and Wind River's's transition to its new Test Management business.

All in all, however, fiscal year 2009 was a very good year for the Linux OS, tools, and services provider. As CEO Ken Klein noted in the earnings call, “The Wind River team has done an excellent job of delivering on our objectives, especially in light of current economy.”

Yearly revenues totaled $359.8 million, compared to $328.6 million the previous year, an increase of 9 percent, reported the company. Net FY09 income was $10.8 million, compared to a net loss of $2.4 million in FY08.

The FY09 revenues, however, ended $5-6 million lower than the company projected last quarter. The severity of the recession, meanwhile, led Wind River to reduce expectations for the coming year. The company is now projecting fairly flat growth in FY2010, with revenues ranging from $360 million to $380 million, and with profits of 56-60 cents a share.

By comparison, analysts had expected to see about $400 million and 60 cents per share for the coming year. First quarter expectations are even more pessimistic, with revenue expected to hit only $80-$82 million. (For a complete rundown of Wind River's earnings, see its site for investors, here.)

Tilcon IDS
(Click for details)

Wind River's lower first quarter projections may reflect its recent $3.5 million acquisition of Tilcon, which develops the Tilcon IDS GUI development software (pictured), but the dismal economy appears to be the chief culprit. Klein noted that the company has recently see a “compression” in deals made in the over $1 million range. “We're being cautious,” he said. “There is an incredible amount of uncertainty right now, and customers are buying line of sight and short term, not over the horizon.”

Yet, Klein had plenty of good news to report. Although the company saw only eight deals greater than $1 million in the fourth quarter, there were 190 deals greater than $100,000, as well as 300 design wins. Looking forward, he continued his theme that Wind River was well prepared to weather the economic crisis. Although he didn't go as far as to repeat last quarter's suggestion that “to a certain extent, the recession is our friend,” he did suggest some silver linings. Indeed, as one analyst in the Q&A noted, projected flat growth might even be considered a positive trend in the current economy.

High hopes for smartphones, MIDs, green energy, and infrastructure

According to Klein, tighter budgets are leading more companies to switch from DIY development to commercial solutions such as Wind River Linux. In addition, consumer devices like smartphones and MIDs (mobile Internet devices), where Wind River expects to play strong this year, are outperforming and stealing share from PCs and feature phones, he said.

Klein also expects that in both the Linux and VxWorks segments (the latter grew 11 percent last quarter) infrastructure investment would help cushion the blow. With the recent US federal stimulus bill, Klein projects increasing investments in broadband deployments, trains, general infrastructure, wind and solar energy, “and to a certain degree nuclear,” he said. “Infrastructure investment will not only increase domestically, but also internationally, for example with China's new railroad projects,” said Klein. “There is a lot of opportunity for Wind River.”

Additional trends and comments that emerged during the earnings call:

  • Linux — Linux sales and wins remained strong, said Klein. In addition to the 48 percent fourth-quarter growth in bookings over the previous 4Q, Linux revenues totaled 14 million, a 27 percent increase year over year. Yearly sales involving Linux were said to have totaled $65 million.
  • Auto infotainment — Klein touted the new Genivi Alliance automobile infotainment initiative, which is basing its standardized reference platform on the Intel Atom running a special automotive version of Wind River Linux. (He did not, however, note that the auto industry is suffering more than most, and one of the key members of the alliance, GM, appears to be on the verge of banktuptcy.)
  • Smartphones — Once again, Klein touted his company's participation in all the major mobile Linux device consortia, including Android, Moblin, and especially LiMo, where it plays a key integration role. Klein had no major design wins to announce at this time, but interestingly he listed the LiMo Foundation as one of Wind River's top customers for the fourth quarter, along with major telecom and industrial firms.

    TI's new Zoom board
    (Click for details)

  • MIDs and netbooks — On the Android front, meanwhile, Klein focused not on phones, but on MIDs, and potentially, netbooks. He mentioned a Q4 reference design win with a wireless integration services firm, in a Wind River-fueled design that runs Android on a Texas Instruments (TI) ARM Cortex-A8 OMAP3430-based Zoom development board (pictured). Other recent demonstrations that involved Wind River technology included a CES demo with Qualcomm in which Android ran on one of its Snapdragon SoCs on a “MID”-sized screen. At Mobile World Congress, it demo'd a MID Moblin demo with Intel running its Wind River Linux Platform for Mobile Internet Devices. Although Wind River currently has no netbook play, Klein said that “it's pretty clear” his company would soon have a netbook product, and that Wind River's MID distribution could very easily be converted to netbooks. “We're well positioned for netbooks, whether it's Android or Moblin,” he concluded.
  • Wireless broadband — Wind River had two Carrier Grade Linux design wins for LTE 4G technology in the fourth quarter, said Klein, and he expects more action on LTE and WiMAX in the coming year.
  • Multicore — Klein was very confident in his company's positioning in multicore, including a recently announced deal with Intel involving Wind River's emerging hypervisor technology. “Multicore adoption is a disruptive technology trend,” said Klein, who added that the increasing complexity of multicore development will lead developers to a commercial solution. Klein also that his company will add multicore support to its entire portfolio in FY10.


More information on Wind River earnings, as well as webcasts of the earnings call, should be available at its site for investors, here.

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