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Wind River Systems CEO: Intel 'Hamstrung' Our Growth

After Intel completed its sale of Wind River this week, Wind River's CEO told CRN that the company's growth had been "hamstrung" under Intel, which had prevented the IoT software provider from working with other silicon companies.

Wind River Systems CEO Jim Douglas said the industrial Internet of Things software provider's growth was "hamstrung" while it was under the ownership of Intel, but that's no longer a concern.

Intel completed its sale of Wind River to TPG Capital on Tuesday, making the vendor of embedded operating systems for heavy industries a standalone company once again (Wind River was publicly traded before Intel acquired it in 2009). The deal to sell Wind River was announced in early April while Santa Clara, Calif.-based Intel was under the leadership of former CEO Brian Krzanich, who was ousted this month following the disclosure of a relationship he had with a former employee that broke company policy.

In an interview with CRN, Wind River's Douglas said his Alameda, Calif.-based company had "certain limitations" under Intel's ownership because of the semiconductor giant's silicon priorities, and that its newfound independence would allow Wind River to grow faster.

"Not a criticism because it was the right business decision — more of a frustration — but if you looked at the investment thesis dollar-for-dollar in investing in some of the software areas that we would want to pursue versus some of those silicon areas that you'd want to pursue in the IoT domain, the silicon investments made way more sense financially just given the margin structure and the ability for Intel to scale. So completely logical, yet it hamstrung us a bit in terms of looking at us as a standalone entity and trying to achieve our growth objectives," Douglas said.

Douglas declined to disclose Wind River's sale price.

When the deal was announced, Intel's top IoT executive, Tom Lantzsch, said the spinout of Wind River was "designed to sharpen our focus on growth opportunities that align to Intel's data-centric strategy," despite industrial IoT remaining a part of that strategy. Wind River had been a part of Intel's IoT Group, whose annual revenue grew 20 percent to $3.2 billion last year, but the subsidiary had been a small percentage of that business, a source said at the time. Intel, however, did say that Wind River was profitable while declining to break out its sales.

The divestiture of Wind River made sense for Intel, Douglas said, because Wind River was driven by operational expenditures as a software company, which Intel can now use to invest in its capital-intensive silicon manufacturing processes.

Douglas said Wind River's key performance indicators were different from Intel's, which resulted in a "set of overhead associated with being part of Intel that wasn't consistent."

"In some cases, there were investments that made complete sense as part of the Intel vision and strategy that, if we were on a standalone basis, wouldn't have necessarily made sense that we gladly made as part of Intel, but there was a cost associated with that," he said.

As an Intel subsidiary, Wind River also "lost the right to have strategic relationships with a lot of the other silicon supplies," according to Douglas.

While the companies have now parted ways, Intel and Wind River have both said they will remain important ecosystem partners, which Douglas said was largely how his company was treated underneath Intel. "I had a fully built-out staff to run an independent company," Douglas said. Wind River also had its own separate networks and enterprise resource planning and customer relationship management systems while it was a subsidiary under Intel.

Intel never sold Wind River's products while the company was a subsidiary, according to Douglas. Instead, Intel built reference designs for systems, such as Intel's Moon Island gateway, that came with Wind River software and would be given to original device manufacturers as part of Intel's channel efforts — a practice that will continue, he said.

"Sometimes when you do things within family, it's not always as easy as when you're doing it with somebody else, so us being a little more formal in how we interact on those programs [with Intel], we actually think it's going to benefit us a lot," Douglas said.

As for what Wind River's independence means for its channel partners, Douglas said there aren't any changes right now. The CEO said Wind River mostly focuses on direct sales, with systems integrators and other channel partners representing roughly 15 percent of total revenue, but he indicated that the company is exploring potential changes he declined to elaborate on.

"The thing we've been continuously looking at is, are there ways for us to be more intelligent to use partners to get more footprint?" he said.

When asked to comment on Douglas' remarks, Intel's Lantzsch mostly reiterated Intel's previous talking points about Wind River in a prepared statement.

"The divestiture of Wind River sharpens the focus of Intel’s Internet of Things business on higher growth opportunities," he said, later adding that Intel "will continue to collaborate with Wind River on critical software-defined infrastructure opportunities, and we wish them well as a standalone company."

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