Closing The Book on Embedded: Intel Buys Wind River

This one strikes a personal chord. Back in fall of 2000, my partners and I sold Rapid Logic, a device management platform and tools company that we had built from first heartbeat to a $10M business, 150+ customers and 225+ design wins (I was co-founder/CEO throughout) to Wind River for $67M. Today, the news dropped that Intel is buying Wind River for $884 million dollars.

While some will spin it as Intel getting serious about software, or moving up the solutions stack, my guess is that the net out is a 1+1= <2 outcome (something that Intel factored into the price that they paid for the company).

If anything, Wind River's inability to breakout, despite a once Microsoft-like position of dominance, is a by-product of their failure to meaningfully go "up the stack" and away from their historical focus on the silicon layer as a primary differentiation point.

In other words, if Wind River had enabled the next generation of Cisco and Apple killers by providing more differentiated OEM-in-a-Box offerings, ala what Google is now trying to do with Android, they would not be staring at a $900M market cap and relatively flat revenues, margins and stock price.

In fairness to them, it's not like anyone else stands out as knocking the ball out of the park in the embedded domain, so this is perhaps just the last chapter (for now) in a book that began when Wind River and Integrated Systems merged back in 1999 (read: commoditization/consolidation).

The counter to that, though, is that the failure of the embedded gorilla (i.e., WIND) to innovate its way to greater heights made them susceptible/blind to disruptive threats like Linux, mainly because they never grokked the essential point that a loosely coupled combination of OS, silicon abstraction and protocol soup were no longer enough to build a multi-billion dollar company.

In other words, when a market's 800-pound gorilla shows as little vision as Wind River has, doesn't really try to set any meaningful standards that others can build upon in some sort of synchronized fashion, but yet manages to stomp out nascent companies, that has to feed back into the market as well.

Specific to Intel and their aims via this deal, let’s be clear; there is very little software systems DNA within Intel, despite the fact that there are many thousands of software engineers within the company. A paradox, I know, but hard truth based on 13+ years of working with them.

Hence, barring a pretty serious religious conversion, software will always be the conduit to sell more silicon, which gates the likelihood of truly innovative solutions coming out of the combined entity.

Here’s some data on Wind River’s performance since the acquisition of Rapid Logic became “liquid,” with a chart on their performance relative to NASDAQ (courtesy of Kedron Wolcott, one of Rapid Logic’s co-founders with James Blaisdell, Lee Cheng and myself).

Wind River Stock Price since (12/8/2000)
Number of days above $40: 4
Number of days above $30: 47
Number of days above $20: 130
Number of days above $10: 1190
Number of days below $10: 932
Number of days below $5: 212

Wind River Stock Performance (relative to NASDAQ)