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Wind River Cascades in Silence

After an analyst's report sent the stock down 35% Friday, the software company has grown suddenly evasive.
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SAN FRANCISCO - What's going on at

Wind River


? If anyone knows, tell Wall Street.


Lehman Bros.

analyst Mike Stanek issued a research note Friday that prompted a 35% plummet in the stock's value, the Alameda, Calif.-based company seems to have cut off communication to the outside world. After speaking to Wind River's CFO Richard Kraber in a routine call on Friday morning, Stanek wrote that the company -- which helps firms develop embedded software -- would see a slowdown in its revenue growth rate in fiscal year 2000.

Stanek, whose firm has no underwriting relationship with Wind River, maintained his buy rating on the stock and left his estimates unchanged, saying that the company would likely meet Wall Street's 29-cents-per-share consensus forecast for the fourth-quarter ending Jan. 31. The company says it will report fourth-quarter earnings on Feb. 25.

But investors, accustomed to 40%-plus growth rates from Wind River, honed in on the prospects of slower growth, sold off the stock and sparked a flurry of phone calls for more information.

Around 1 p.m. EST on Friday, Wind River's stock was trading above 46, then it went over a waterfall after Stanek's report began to circulate. By 1:30 p.m., the stock was trading at 30 1/4 before recovering a small bit of ground to close at 32 3/16. Most annoying to analysts was that the company didn't seem interested in talking to them after talking to Stanek.

"That epitomizes selective disclosure because

Stanek's customers got a huge head start," says Matt Belkin, an analyst at

Hambrecht & Quist

, a firm that helped take Wind River public in 1993 and participated in a secondary offering. Despite Belkin's best efforts on Friday, Wind River wouldn't return his phone calls.

Belkin told


on Friday that all H&Q's estimates and ratings on Wind River remained unchanged. Later that day, he said the firm was reviewing its rating due to the lack of response from the company. On Monday, H&Q went further, suspending its rating. Until Wind River offered the investment bank more information, underwriters would not carry a rating for the software company.

Wind River issued a press release on its Web site after the market closed Friday, saying the company expects fourth-quarter revenues between $37 million and $39 million and profit between 27 and 30 cents, compared with revenues of $28 million and a loss of 28 cents in the year-ago period.

The statement quoted Kraber as saying, "While we cannot predict with any certainty whether our revenue will meet or exceed our expectations, we do anticipate another solid quarter of results and remain confident as to our prospects for fiscal 2000." After repeated calls by


, Kraber declined to offer any comment.

Belkin did get through to the company on Monday but heard little. "We finally spoke this morning and it was a sort of mellow conversation -- more of a courtesy call," Belkin says. "The company still isn't saying anything. There's no new news because it won't disclose anything until it reports earnings. They're standing by the press release and aren't saying anything as part of a newly indoctrinated policy to Wall Street."

On Monday, Wind River rebounded in the wake of the company's press release, rising 9% to 35. But the stock is still down 24% from its level before the Lehman report.

Why would Wind River alienate its investors and Wall Street this way? "I don't want to speculate on why, but it really inhibits our ability to cover the stock and render an opinion," Belkin says.

As originally posted this story contained an error. Please see Corrections and Clarifications.