Wind River Beats Estimates

Revenue rises 20%.
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Updated from May 31

Wind River's

(WIND)

first-quarter loss more than doubled from a year ago, but the company beat analysts' expectations.

The Alameda, Calif.-based electronic-device-software maker said it lost $4.6 million, or 5 cents a share, compared to a loss of $2.1 million, or 2 cents a share, for the same quarter of the prior year.

Excluding items, Wind River earned $3.1 million, or 4 cents a share, beating analysts' estimate of 2 cents a share.

Revenue rose 20% to $78 million, above the expectations of analysts polled by Thomson First Call, who had predicted revenue of $70.9 million.

"The average deal size continues to increase," CEO Ken Klein said on a call with analysts. The company recorded an atypical 125 transactions above $100,000 in the quarter, with the number of design wins ¿¿ over 200 ¿¿ being up "substantially over the first quarter of last year."

Wind River said its deferred revenue increased 24% to $126 million.

For the second quarter, the company projected revenue of $77 million to $79 million, a loss of between 4 cents and 5 cents a share, and EPS of 3 cents to 4 cents, excluding items.

Analysts had been expecting $77 million in revenue for the second quarter and EPS, excluding items, of 8 cents.

New product releases slated for the coming six weeks include Advanced Networking Technologies, a middleware development tool for VxWorks 6 and Linux platforms that will include wireless networking capability; a Linux-based development platform targeted at the mobile phone market; and the next release of its Lab Diagnostics, Klein said.

"We're very focused on generating royalties for Linux," he said.

The company added 15 diagnostics customers in the quarter, bringing the total to over 50, said Klein.

"We're getting the sales earlier in the decision-making process," Klein said. The company's sales staff, which is growing across product lines, is getting in the door before competitors "are aware that a design cycle is starting."

The size of deals is growing as selling becomes "more strategic and is done at a higher level," Klein said. The salesforce reaches more high-level executives than in the past, rather than design engineers who have a harder time making the case to management for outsourcing design and optimization based on open-source Linux, Klein said in an interview.

Since acquiring Interpeak in March 2006, Wind River has just completed integrating Interpeak's networking, security, mobility and wireless software into its operating system platform, marketing director John Bruggeman said. And that makes it easier for salespeople to make the case that outsourcing means faster time to market, Klein added.

Customers are also reusing the tools and designs across more types of silicon and across multiple geographies, adding to deal size, Bruggeman said.

The automotive sector is a growth market for Wind River. One would-be "roll-your-own-Linux"client had been set to hire a 50-member team to design a navigation system, before Wind River walked in the door, Klein said.

Shares of Wind River were recently up 53 cents, or 5%, to $11.14.