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Stock-Based Compensation Expenses Drag Wind River To Red

Design software optimization vendor Wind River Systems posted a 5% year-to-year increase in fiscal first quarter revenue, but reported a quarterly loss of $2.1 million.
SAN FRANCISCO — Design software optimization vendor Wind River Systems Inc. posted a 5 percent year-to-year increase in fiscal first quarter revenue, but took a loss of $2.1 million based on generally accepted accounting principles (GAAP), the company said Thursday (June 1).

The GAAP net loss, which equates to 2 cents per share, compares to a $1.8 million net income for the same period of fiscal 2006. Sequentially, the net loss is a significant turnaround from the net income of $16 million that the company reported for the fourth quarter of fiscal 2006.

Total revenue for the fiscal 2007 first quarter, which ended April 30, was $65 million, compared to $61.8 million for the same period of fiscal 2006. Sequentially, revenue was down 7 percent from $70.21 million in the fourth quarter of fiscal 2006.

Consensus analyst estimates of quarterly revenue for Wind River had called for more than $66.4 million. The company's non-GAAP revenue of $2.8 million, or roughly 3 cents per share, also fell short of analyst expectations of 4 cents per share.

Wind River said it was hurt by stock-based compensation expenses related to the adoption of accounting standard SFAS 123R amounting to about $5.1 million. Stock-based compensation expense is being reported for the first time in the first quarter of its fiscal 2007, Wind River said, and was not included in the company's fiscal 2006 results.

"Our operating expenses were up slightly in the quarter primarily reflecting investments in marketing and sales," said Mike Zellner, Wind River chief financial officer and senior vice president of finance and administration, in a statement. "We remain committed to delivering 20 percent operating margins excluding SFAS 123R's expense impact, when we reach quarterly revenues in the high $70 millions. We will continue to manage expenses, including carefully controlling headcount, while investing in areas where we see strong growth opportunities."

Wind River (Alameda, Calif.) said it currently expects to post second quarter revenue between $66 million and $68 million. The company expects to post a GAAP net loss of 1 to 2 cents per share, which equates to roughly $857,000 to $1.7 million. For the fiscal year, Wind River said it expects to post revenue of $290 million to $300 million, with GAAP earnings per share in the range of 12 to 17 cents.

Wind River's second quarter guidance came in lower than consensus analyst expectations, which called for second quarter revenue of nearly $73 million. The company's fiscal year revenue estimate is consistent with consensus analyst expectations of $295 million in fiscal year revenue.

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