Investors have unloaded on many software companies lately, such as Red Hat (NASDAQ:RHAT), Siebel (NASDAQ:SEBL), Novell (NASDAQ:NOVL), and so on. However, with the markets perking up this week, investors are a little more sanguine about the sector -- at least for those stocks that exceed expectations.
This was the case with Wind River (NASDAQ:WIND), which reported its earnings yesterday. On the news, the stock surged 18% to $9.77.
The company specializes in so-called device software optimization (DSO for those who are acronym junkies). Basically, the company develops solutions that make software much faster and more reliable for a myriad of industries, such as aerospace, defense, digital consumer, industrial/automotive, and network infrastructure.
For the second quarter, Wind River posted revenues of $59.4 million, which was an 18% increase from the same period a year ago. This was higher than the company's guidance of $53 million to $55 million. Earnings were $2.3 million for the quarter, which compares with a loss of $9.3 million in the same period a year ago.
The company is finding success with its subscription model. In fact, this model has been a driving force in the software industry, especially in light of the success of Salesforce.com (NYSE:CRM).
Wind River is also benefiting from smart partnerships. One is with Red Hat, a leader in the Linux marketplace. In the deal, Wind River is developing Linux software solutions for cell phones and other devices.
While spending appears to be weakening in the software sector, Wind River is finding ways of continuing to grow. And, according to the company, it expects the growth to continue, as it upped its guidance for third-quarter revenues to $57 million to $59 million.
Discuss the subscription software model and its benefits with other Fools on the Wind River discussion board.
Fool contributor Tom Taulli is the author of The EDGAR Online Guide to Decoding Financial Statements. He does not own shares in any of the stocks mentioned.
