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Technology Stocks : RATIONAL SOFTWARE- BUY OR HOLD

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To: diana g who wrote (2309)	4/9/1998 10:35:00 AM
From: J.R.	Read Replies (1) of 3115

Beating estimates.. Yahoo beat estimates today and is up 10%. Rational just meeting estimates and continuing to defer revenues, rather than beating estimates, and creating some excitement will leave all longs waiting for a long time. A record of meeting estimates is a goal to expand the P/E multiple. Rational now trades at a discount to multiples of other companies in the same industry. P/E expansion with that approach will take years, not quarters to occur. If they want to trade like other growth companies, they need to develop a track record of consistently beating estimates. Companies like CSCO,MSFT and others sport high valuations for beating not just meeting estimates. Even investors with long views will eventually lose interest with a too cautious approach. I, for one, do expect them to beat this quarters #'s and still be able to defer some revenues. Comparing Yahoo isn't fair, however, they are at about $107 with estimates for current year of .37. Rational is less than $13 with estimates at .55, for current year. Just my two cents.

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