Tuesday, June 09, 2009

Intel to Acquire Wind River Systems ~ Update 2

VDC’s Continuing Analysis

As we said last week, “one could well imagine the discussions that are going on both sides of the embedded market”. Most likely this included many, many calls from both Intel and Wind River with their various strategic partners. Some partners may be satisfied, at least in the near term, and others more skeptical on Wind River’s position to continue to enable multiple hardware architectures and the ways in which they plan to securely partition sensitive, confidential company information between the subsidiary and mother Intel going forward.

Business as usual?

We suspect that software partners are less skeptical in the near term over the agreement and in some cases delighted to hear the news. Why? Because it creates an opening that many hope to explore and take advantage of to increase market share. These opportunities scale both VxWorks and Linux development on non-Intel architectures.

Never mind discussions on just both sides of the hardware/software market – embedded manufacturers are also a major part of the conversation. Consider the fact that automotive, military, aerospace, telecom and other type of development projects can take years of development and life-cycle support. In the case of military and aerospace, you can be talking about decades of support.

Can Intel/Wind or WinDtel convince these types of embedded manufacturers that they will continue to support, optimize, and invest in multiple architectures over their product development life? What can these manufacturers expect from their silicon suppliers? Will these silicon suppliers continue to be engaged in the short- and long-term with Wind River? VDC expects that none of these questions have been answered at this time but we also expect that embedded manufacturers are already conducting their due diligence and asking a lot of questions as part of looking at contingency plans for existing and new project designs on the drawing board that design in non-Intel silicon.

From an engineering perspective, it is difficult to design out any one component of a platform -hardware, operating system, development tools, etc. - within existing projects. There’s any number of technical challenges, a comfort factor, in many cases years of experience, and a trusted supplier relationship that need to be weighed as part of any decision to transition. Hard decisions for sure, which could be necessary and costly for embedded manufacturers.

Could history be an indicator of what to expect?

Two examples come to mind. The first is from the 2000/2001 timeframe when Wind River System acquired ISI and questions abounded about support for pSOS and pRISM (development tool environment). For embedded manufacturers faced with the reality of having to move to the VxWorks platform (at some time), the competition seized on the opportunity and looked to take advantage of the situation by offering various migration and evacuation kits from pSOS to other platforms. Could we see similar moves like this from the marketplace in the near term?

The second was reminded to VDC as part of a discussion last week with a hardware market supplier - the acquisition of Metrowerks by Motorola. Metrowerks at the time was a leading supplier of software development tools with their CodeWarrior tool chain which supported multiple non-Moto architectures such as MIPS, Hitachi, etc. The acquisition resulted in Metrowerks becoming a subsidiary of Motorola with a corporate commitment to continue to invest in, support, and enable multiple hardware architectures via the CodeWarrior tool chain.

This acquisition in particular has an eerily similar ring to the Intel/Wind acquisition – subsidiaries, continuing to support multiple hardware architectures, looking for other opportunities to do business with embedded manufacturers. This may have worked in the short term for Motorola but over time the decision was made to pull support of non-Moto architectures and focus on offering a tool chain solely optimized for Motorola/Freescale silicon.

For sure, Intel is serious about the embedded market with a goal to increase sales of embedded processors. Questions will continue and parties will look to posture themselves in ways that protect and/or seize on the opportunity to expand market share.

It may be business as usual in the short-term, but we expect to see some signals coming from the market as to which direction this acquisition will take.

Maybe some signs from silicon and software suppliers with new announcements of expanding strategic partnerships and/or support for new software platforms?

Or perhaps mid- to longer-term with software supplier announcements on new design wins in the key markets on which Wind River Systems has traditionally focused?

Only time will tell.

VDC will continue to follow this announcement and look to comment further so check back to the Blog or register via RSS or email to be notified when Blog updates are posted.

Thursday, June 04, 2009

Intel to Acquire Wind River Systems ~ Update 1

VDC’s Analysis

VDC's investigation and analysis of Intel's planned acquisition of Wind River Systems is on going, but the following represents some of our initial thoughts and questions after considering today's news:

One could well imagine the discussions that are going on both sides of the embedded market. On one side, you have ARM, Freescale, MIPS and a host of other silicon partners. On the other side, you have software and tools suppliers such as Microsoft, Green Hills Software, LynuxWorks, QNX Software Systems, MontaVista Software, and a host of other software suppliers.

Today’s announcement indicates that “As an Intel subsidiary, Wind River will continue to develop innovative, commercial grade software platforms that support multiple hardware architectures …” Considering this statement, it’s somewhat easy to understand that questions are being raised and the implications being examined from both sides.

How might this acquisition limit the timely access to technology roadmaps and support for current relationships within the supply-side of the embedded software market? Could suppliers find themselves at a disadvantage somewhere down the road?

Wind River Systems supports a host of silicon architectures from multiple suppliers. It is critical for both the hardware and software segments to align silicon and software well in advance of availability. This requires strategic relationships in which technology roadmaps and engineering support is leveraged by both parties. Is it reasonable to expect that ARM or Freescale or MIPS amongst others would share their technology roadmaps with an Intel subsidiary so that their architectures could be enabled through Wind River’s software solutions?

There are certainly more questions than answers at this time and discussions on both sides of the embedded market will continue as they sort out the ramifications of such an acquisition.

Wind River is hosting their Q1 FY2010 earnings call this afternoon (June 4) at 5 p.m. EDT. This is certain to be topic discussed and questioned further during the course of the call. Details on the call can be found at" http://ir.windriver.com/phoenix.zhtml?c=91814&p=irol-newsArticle&ID=1291330&highlight

Stay tuned as VDC looks to comment further.

Intel to Acquire Wind River Systems

What Happened?

In a mammoth, $884 million deal, Intel (NASDAQ: INTC) announced its intent to acquire Wind River Systems (NASDAQ: WIND). The aggregate price tag puts approximately a 44% premium over the June 3rd closing price of $8.00 per share for WRS common stock.

After this acquisition, which is expected to close this summer, Wind River would operate as a wholly owned subsidiary of Intel and report into its Software and Services Group.

VDC’s View

This acquisition signifies a strategic extension of the partnership that Intel has been strengthening with WRS over recent years, as Intel has been attempting to extend its reach into more resource constrained, deeply embedded devices and as WRS has been positioning itself as a leading provider of software solutions for multi-core architectures.

Beyond the promise of offering enhanced system integration and faster time-to-market to their customers, VDC expects that this acquisition offers Intel the critical core competencies to expand its business within the mobile device segment. The maturation of Wind River's product and service offerings targeted at this device class - especially with respect to Linux - should help Intel better serve a mobile industry that has long been dominated by ARM IP-based silicon.

Stay tuned as VDC looks to comment further on any additional news.