Wind River Systems Inc’s turnaround under chairman and CEO, Ken Klein, looks set to continue thanks to improving market conditions, a new management structure, and its recent conversion to the Linux operating system.
Klein was appointed to the top job at the Alameda, California-based embedded operating system and tools specialist at the end of 2003, shortly before the company reported a third quarter net loss of $6.9 million on revenue down 15% year-on-year to $49.6 million.
Since then the company has got itself back on track and back into the black, with net income of $2.3 million in the most recent second quarter on revenue up 17.9% to $59.4 million. According to chief marketing officer, John Bruggeman, that turnaround is in part thanks to the adoption of Linux, improving conditions, and a change of management structure.
As well as a new CEO and chairman, the company also has a new head of corporate development, new sales leadership and a change in structure with engineering now reporting directly to Klein.
The company had previously ridden the telecommunications boom to success with its VxWorks platform and development tools an essential part of many telecoms devices and developments. When the telecoms boom turned to a bust, Wind River, with 70% of its revenue coming from telecoms, also felt the pinch.
The company was really heavily tied into those market dynamics, said Bruggeman, and it was too heavily tied into the proprietary operating system. Wind River now has more balance to its revenue sources, according to Bruggeman, with 30% coming from telecoms, 25% from consumer electronics, 25% from aerospace and defense, and 20% from industrial automation.
It has also given its users more choice when it comes to operating systems, having expanded development tool support to Linux in October 2003, before expanding tool support and entering into a joint development agreement with Linux distributor Red Hat Inc in February 2004.
Wind River was forced to do an about-face on that, admitted Bruggeman. This is a shift in the market and we’re being driven to this conclusion that the operating system does not matter, it should not matter.
That is all part of the change in the industry away from focusing on in-house operating system and infrastructure development towards application-level differentiation, according to Bruggeman. Our growth has mirrored this change in the market from build your own to buy the commercial infrastructure, he said.
Instead of worrying about what operating system an application is developed on, internal development teams are now focused on subjects such as connectivity, security, web services, and data management, he said. About 80% of the market did in-house development: operating system, infrastructure and applications, he said. It got too complex and customers had to do more.
Now in-house device development is focused more on application-layer differentiation. It’s analogous to what happened in computers in the 70s and 80s, said Bruggeman. One factor in this is standardization around Linux, the open source nature of which still enables developers to tweak the code, should they wish.
Wind River’s development agreement with Red Hat produced its first fruits in the form of version 2.0 of the Workbench tools suite in June. It is believed this will be followed up shortly by the delivery of a platform for network equipment targeted at the telecommunications market, one of the areas previously highlighted as a target for joint development.
As well as providing more choice for developers, Wind River’s adoption of Linux has also boosted revenue for its proprietary VxWorks operating system, according to Bruggeman, with customers wanting to talk to the company about Linux but selecting VxWorks for its real-time capabilities. It was a big risk we took but actually by embracing Linux we have increased demand for VxWorks, he said.