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Technology Stocks : RATIONAL SOFTWARE- BUY OR HOLD

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To: Randy Ellingson who wrote (2804)	1/20/1999 7:34:00 AM
From: Hans-Erik Eriksson	Read Replies (1) of 3115

Randy, > Just a thought, but perhaps Rational sees more potential > profits in their services and is happy to increase penetration > at the cost of decreasing product margins. Is that likely to > be part of their longer-term goals? Which tends to command > higher profit margins in this field, product or service? I think RATL is first and foremost and tools product company, and will remain so. The reduced prices (still not exactly 'cheap' or 'give-away'!) are to increase penetration in a market that they can see is there - many companies want to 'industrialize' their development process but have found that buying a complete set of tools for it has been to expensive (a too high price barrier). Also, by selling in suites you are 'forced' to buy the entire suite - I got Microsoft Office but regularly only use two out of the four products in it. RATL plans to increase overall volume by selling bundles of products to more customers at a lower price/product, but in the end get an overall higher margin. With that said, there's still a great potential in services - but the base of RATL will remain products. IMHO. Best, /Hans-Erik

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