RATL ($24) warns results could trail forecasts
(UPDATE: Recasts, adds comment from company, previous CUPERTINO)
By Andrea Orr
PALO ALTO, Calif., July 2 (Reuters) - Rational Software Corp (NasdaqNM:RATL - news), which makes tools to develop software, warned on Monday that its first-quarter results could fall short of Wall Street forecasts because of new signs of weakness overseas and more cautious spending in all its markets.
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In a conference call with industry analysts, Rational Chairman Paul Levy said a number of its customers were under ``extreme economic duress,'' which was forcing them to cancel or scale back their orders.
As a result, Cupertino, California-based Rational said it now expects earnings for the fiscal first quarter ended June 30, excluding unusual costs, to come in between 7 cents or 8 cents per share share, on revenues of $172 million to $176 million.
This latest forecast puts Rational's expected first quarter income toward the low end of Wall Street's estimates. Analysts, on average, had expected the company to report earnings of 8 cents, with their estimates ranging from seven cents to nine cents a share.
The new revenue forecast is below the $185.4 million consensus analyst estimate.
Rational stock, which had fallen 60 cents to $27.45 during the regular trading session, dropped to around $24 in after-hours activity, after the warning was issued.
The stock is now less than half its 52-week high of $70.63.
Rational, which joins a number of software companies to issue revenue or earnings warnings on Monday, said the economic slowdown in North and South America continues to have a large impact on its results. In addition, it said it saw new weakness during the quarter in Europe and certain parts of Asia.
Although the company has scaled back spending to adjust to the slowdown and maintains that its products will help companies save money by automating software development processes, it said it is dealing with the same economic factors that have depressed the entire high-tech sector.
Levy said the company is having to put a lot more selling effort into closing each deal, with customers more carefully scrutinizing every purchase.
``A lot of the big orders have become medium-sized orders and the medium-sized orders are turning into small orders,'' he said.
Another problem is pricing pressure from other software companies.
``Customers are negotiating harder than ever,'' he said. "But we've drawn a hard line. We're willing to not take orders if we think they don't represent good business for Rational.
``We've seen some of our competitors willing to give away their products just to close the deal.'' |
