I've followed Rational for a long time and while I don't disagree with you, I think there are subtleties that need to be brought to light.
Essentially, what you have in this space is the integrated suite solution vs. best of breed point products. Rational has an integrated suite, where they've tried to mimick Microsoft and Microsoft office, but do it in the world of high priced development tools. Their suites are for analysts, designers, testers and eventually project managers. These suites take "point products" Rose, ReqPro, SQASuite (or whatever it is called now)and then integrate them with secondary and tertiary products to form different suites. They put a very large price point on the Suites and look for significant upselling capabilities across Suites.
Then there are a set of vendors who have taken an approach to focus on core expertise and integrate products: Mercury, QSS(Doors), Technology Builders (TBI- the Caliber tool you mentioned), Pagoda, Continuus, SELECT/Princeton Softech, Riverton are examples.
As for Mercury specifically, they are very strong marketers, deal makers and have long been a hot company. The bottomline is that they were kicking SQA's butt before Rational bought SQA (the market cap of MERQ was too high to consume for RATL). They locked up distribution deals with the major ERP vendors and were MUCH faster throwing "e-this" and "e-that" in front of their products and in their marketing literature. While Rational was working to integrate Pure and Atria, SQA and RequisitePro, working very hard to be a sexy company and rid themself of the "defense, object modeling" tag, MERQ went out and took control of the Digital 1000 in the testing arena. Across the board, they took control.
Having said all this, I own alot of Rational and no MERQ. Bad move? Well, I'm starting to wonder. Bottom line is that I bought RATL along time ago and I've done very well. However, I'm getting out if there is a pop after the earnings. I think this company has gotten too big to keep up with smaller, more nimble companies like MERQ, QSS and others. Additionally, they are not considered "true colleagues" to the Digital World. The one Rational product that would be something every Digital 1000 CO. would need regardless of process or pains is ClearCase and that is too complex to use, expensive to buy and costly to maintain.
In my eyes, companies like Vignette, Broadvision, Interwoven, MacroMedia and others are going to be the development suites for the Digital 1000 and I don't think Rational is quick enough, savvy enough or positioned correctly to make inroads against these juggernauts. Look at BVSN- 40 to 150 in 2 months. One final thought- with Microsoft buying Visio, they basically took the modeling world and said "here is another free product." Rose is a commodity, ReqPro is scoffed at, ClearCase is too complex, and expensive and MERQ kicks their ass in testing. I think that the run from 8 to 30 was good and I'm sure that RATL will continue a slow upwards movement, but the money I've invested in RATL could and should be put to much better use in other companies so I think I'll keep a small portion in my "low risk" segment of my portfolio and move on after these earnings reports. |
