By Stephen Phillips
Integrated Systems Inc, the market-leading operating systems software vendor for embedded systems microprocessors, signed off its last quarter before being acquired by rival Wind River Systems Inc with upbeat earnings – five cents a share above what Wall Street had tipped. The company used Friday’s earnings briefing for journalists and analysts to announce that Wind River’s $417m buyout had received regulatory approval and would be completed in late January.
Sunnyvale, California-based ISI touted fiscal third-quarter net income of $4.2m, or $0.17 a share, after expenses and tax payments from its $38m purchase of Chicago-based embedded systems software tools vendor, Software Development Systems Inc (SDS), in July. The three analysts watching the firm for Wall Street investment banks had on average only expected a $0.12 per share profit for the three months to November 30, according to a poll by First Call. In the corresponding quarter last year ISI had reported net income of $3.17m, equivalent to $0.14 a share. Revenue for the 1999 quarter stood at $43.6m, up 25% on the year ago.
The company said sales of its Prism+ integrated development environment, made up of editor, compiler and debugging tools for software engineers to develop applications on ISI’s pSOS+ operating system, were up 34% on the year-ago, and that one- quarter of sales were to new customers. ISI’s deal with Motorola for the electronics giant to license pSOS+ for use in its future wireless cellular and subscriber devices was struck after the quarter closed.
Sales and marketing costs rose more than 40% on the year-ago quarter at $17.1m, which the company attributed to expenses assumed from SDS on top of a recruitment drive. Executives did not disclose headcount details. Research and development costs increased by almost 64% to $7.2m as the firm said it focused on increasing its range of products for vertical markets and refocused its design center to address key embedded markets. Sales of operating system software and development tools to the consumer market increased to 19%, as a proportion of total sales, from 13% in the preceding quarter, executives said. Sales to voice and data communications companies held steady at 45% of the total.
President and chief executive officer, Charles Boesenberg, said the impending merger with Wind River would pool the two companies’ technical expertise and accelerate product development time. He said the combination would set in place a substantial worldwide sales force, featuring multiple executives assigned exclusively to key global accounts. The 75% premium Wind River is paying on ISI’s pre-deal share price will be recouped from reduced running costs, Boesenberg added.
