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Technology Stocks : Sterling Commerce (SE)

SE 142.24

-8.3%

3:36 PM EST

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To: Bob Howarth who wrote (155)	2/14/1999 2:51:00 AM
From: Turs	Read Replies (1) of 341

Bob - on the surface, good points about SGA and R&D. However, note that some of SE's R&D comes through making acquisitions instead of developing internally. So, product generation is greater than R&D would indicate (and I will admit that acquisitions to date have not worked out as fabulously as intended). Higher SGA comes from SE's focus on building a services effort to leverage their relationship with their customers. Services are already a major piece of most enterprise software companies businesses. While that will create more revenues, it also carries lower operating margins, with the major incremental cost being people, or the S or SGA. As far as mainframe revs go, don't knock it. BMC Software, IBM, etc. were all saved this quarter by mainframe strength. Corporate America continues to rely on its installed base of mainframes for all sorts of processing needs. And I don't think that indicates that SE is in danger of seeing any sort of platform shift slowdown.

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