FYI- He said they bought 1M shares back. However, even with the buyback, their cash reserves increased.
Here is what I thought constituted the underlying messages in his statements:
Major change in approach. 2 quarters ago, e-business did not enter into the discussion, now it is a major strategic initiative.
Mercury should watch out: While he did not address most of the "point products", he did cover Performance Studio and he addressed Rational Team Test 7.0. Direct statements to the market that they will be trying to take Mercury out. He also reference relationships with SAP and PSFT. I think SAP has a strong relationship with MERQ.
The race is won: No mention of competitors, no mention of threats, no mention of roadblocks. This had to be a conscious decision. They made the case today, whether it was heard or not, that they are alone in this race. They do not worry about anyone, they merely want to increase their penetration into their own sites.
"At least 95% of the Fortune 500 as clients": Message: who can displace us?
Bundled product, bundled sales, larger overall deal sizes: IMO, Levy was trying to say that they believe they can sell the suite to 95% of the Fortune 500. That is what they say when they talk about a 5X to 10X increase in penetration in their existing markets
E-business runs on Rational Software: How's that sound for a tag line going forward.
MCI WorldCom: Great customer. Did not mention that they were one of 10 largest, but RATL owns telecom industry. Do you think Nokia pays him to pump up their technical expertise?
Rational will be major player: Clearly they intend to begin to position RATL with the likes of Microsoft, IBM and Oracle. To openly admit that they have not marketed well and to say that they will be changing that should give confidence to analysts going forward. Can you see Fidelity's Computer Fund increasing its % ownership of Rational up with Dell, EMC, Compaq, MSFT, INTC and other stars? Wouldn't that be nice...
Put pressure on the development organization: He could not have put any more pressure on the development organization. "Maybe the most critical product development cycle we have ever been in" My sense is that Levy is pleased with results from the field and is now using that success to issue a challenge to another part of the company. This is a fairly typical management style.
Surprises
Worldwide Seminar/RUP promotion: Philippe Kruchten, Walker Royce, 3 Amigos have all come out with books talking about, in one form or another, "the Rational Way." RUP, UML and other topics. Was surprised that RUP did not get a mention by name (however, neither did Rose, for that matter).
Services: Very surprised that analysts did not ask about service dollars and their plans for services. They said they are offering "one-stop shopping," that their overall strategy is greater than any of their products and that they will provide life cycle solutions. Screams shifting to a service model. Surprising they did not get pressed harder on this.
Overall, I am stoked. I cannot, for the life of me, figure out why insiders sold stock in November. It is baffling. Given these results, can anyone put their finger on it? |
