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Technology Stocks : RATIONAL SOFTWARE- BUY OR HOLD

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To: Thomas Haegin who wrote (2913)	4/18/1999 1:52:00 PM
From: Asymmetric	Read Replies (2) of 3115

Just Wanted to Add a Few Notes Regarding Conference Call. Levy pointed out they received a historic number and dollar amount of orders last quarter: 10 orders for $1 million or more 25 orders for $500,000 or more over 200 orders for $100,000 or more over 400 order for $50,000 or more. and 12,000 individual orders from 5000 individual customers. Indicating broad acceptance of Rational product lines. Cash Flow of $38 million last quarter. An increase in cash assets from $220 million 3rd quarter to $260 million end of 4th quarter was outstanding and represented an increase in cash assets of over 18% in just one quarter alone. U.S. represented 65% of new orders Europe represnted 30% of new orders Asia represented 5% of new orders Days Outstanding (DSO) fell from 74 days to 66 days. 60% of software licenses sold is utilized by companies as part their of embedded products. These companies are involved in life and death competitive struggles in their respective marketplaces and software content is being seen as an increasingly important area for adding value and differentiating product. Rational's tools not only help companies acheive this but also help cut time to market. A ticking off of a veritable who's who of US and international Fortune 500 corporations buying and utilizing Rational software. Levy predicted triple digit growth in fiscal year 2000 for Performance Studio product. Levy also stated that Rational "May have erected nearly insurmountable barrier to entry" with their software products...and that "from where Mike and I stand, the future has never looked better." When the analyst from SG Cowen prefaced a question to Levy with what he foresaw in the future Levy joked: "Lots of green!" and "Lot's of earnings per share!" Levy stated that sales are exceptionally strong and the he suspects that suite sales will continue to exceed expectations. Chris Galvin of H&Q asked whether pent-up demand was part of the demand equation given the fairly recent product launches and the reply was that pent-up demand was not a significant issue. Also the packaging and sales of their software products into suites was not creating any price pressure on individual point product and that they were not seeing any cannabalization of of individual product by their suite sales. Levy also told Rick Sherlund of Goldman Sachs that Y2K was having "no materially substantive impact" and that licensing sales was terrific, and that the company's goal is a 60-40 split between licensing/service. They also stressed that the main market that Rational's products address are only now just beginning to hit their stride and that many of the companies buying their tool products are under an "investment imperative". Companies must be involved with Internet commerce, ie E-business or perish. SG Cowen then questioned why management guidance for future earnings and revenues had barely budged despite all the positive comments being made and what needs to change to make this happen. Levy replied "Predictability is next to Godliness" and because they are just starting out the year, they'd rather have one or two quarters under their belt prior to guiding analysts earnings estimates up. To anyone who hasn't I urge you to listen to the conference call itself. (800-666-8698) Don't know about all the rest of you, but to me, this one's a keeper! Peter.

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