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Embedded OS sales on the mend, Bsquare results suggest
2009-11-06 Article Rating:  / 0
Reporting its third-quarter financial results, Windows Embedded software specialist Bsquare said its year on year revenue was up one percent, but net income fell sharply. According to the company, its sales of Microsoft's embedded operating systems and other third-party software slumped during the first nine months of 2009, but are now increasing again.
According to Bsquare, revenue for the third quarter of its 2009 financial year was $16.4 million, up one percent from $16.2 million in Q308. Total revenue for the first nine months of 2009 was said to be $49.2 million, up one percent from $58.7 million in 2008. However, net income fell significantly -- the company says this amounted to $71,000 during the quarter, down from the $1.1 million reported during Q308. For the first nine months of 2009, Bsquare says, net income was $329,000, compared to net income of $2.3 million during the same period in 2008. The company's EBITDAS (earnings before interest, taxes, depreciation, amortization and stock compensation expenses) was said to be $477,000, touted as the company's "11th consecutive positive quarter," This compared unfavorably with both the $1.6 million EBITDAS reported in Q308 and the $833,000 reported in Q209. Sales of third-party software, such as Adobe's Flash and Solidcore's S3 Control Embedded (now known as McAfee Embedded Security, as we mention later in this story), were an area that continued to be affected by "challenging economic conditions," according to Bsquare. Due primarily to "a decrease in Microsoft license sales," third-party software sales were $22.9 million for the first nine months of 2009, compared to $27.0 million during the same period in 2008, the company says. On the positive side, however, third-party software sales may be on the mend, since they were said to have increased sequentially to $8.9 million for the quarter. That represents an increase of 13 percent over the third quarter of 2008 the company adds. Brian Crowley, Bsquare's CEO, stated, "I was very happy to see the sequential increase in third-party software sales this quarter, particularly Microsoft licensing. This has been the area of our business most affected by the economy and I'm hoping this is a precursor of better things to come." Proprietary software revenue for Q309 was said to be $947,000, up 14 percent over Q308. While Bsquare's proprietary software includes its SDIO stack and reference designs, the primary driver was said to be revenue from TechQuest, the provider of automated testing tools that Bsquare acquired in November 2008. During the quarter, Bsquare reports, it received $273,000 in new revenue from TechQuest products, including the recently launched TestQuest Collaboration Server. The server product is touted as enabling mobile application developers, silicon vendors and device manufacturers to develop and deploy test automation across multiple geographies. Meanwhile, poor economic conditions were said to have lead to declining service revenue in both North America and APAC. Service revenue for Q309 fell to $6.5 million, down 13 percent compared to the $7.5 million received during Q308. According to Bsquare, its ongoing work with Ford to provide services related to the automaker's Windows CE-based Sync automotive technology brought in $3.2 million, compared to $2.5 million in the prior year. However, the company also warmed of "significant project overruns on the Ford project." Stated Crowley, "Our APAC service revenue has been particularly hard-hit by the economic downturn and it is encouraging to see signs of recovery as customers look to start new device projects. Unfortunately, the positive impact from APAC was offset by lower-than-expected Ford revenue due to the overruns. We are in dialogue with Ford to obtain additional funds to account for the extra resources we have applied to the program." Windows Mobile distribution Though the news came too late to affect financial results, Bsquare also announced that it has been named as Microsoft's first Windows Mobile distribution partner. Under the terms of the agreement, Bsquare will begin distributing Windows Mobile internationally, and will also "begin supporting approximately 30 select Windows Mobile partners with licensing, technical support and go-to-market activities as their current direct agreements with Microsoft end." Bsquare said it will "enable new mobility OEMs to get to market more quickly with its TestQuest automated testing products customized for Windows Mobile devices." The company added that it will provide Windows Mobile reference designs, board support packages, technical support, training, and engineering services. While this new distribution agreement has been represented by at least one blogger (see jkOneTheRun, here) as somehow representing a lessening of Microsoft's commitment to Windows Mobile, we believe that interpretation is erroneous. After all, Bsquare already resells Microsoft's embedded operating systems to OEMs in North America, and renewed its agreement to do so on Jul. 1. Products distributed or supported by Bsquare in the U.S. include the following, according to Microsoft:
Bsquare is also said to be a key supplier for some lesser-known offerings from Microsoft: namely, standard desktop OSes that are sold to embedded OEMs with special pricing and licensing terms. These products include the following:
Key events for Bsquare during the third quarter of 2009 included the following, according to the company:
A tour of Coca-Cola's Freestyle beverage dispenser Source: Bsquare Corporation (click to play) Further information Further information about Bsquare's third-quarter earnings, including a replay of a conference call for investors, is available from the company's website, here. Related stories:
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