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Technology Stocks : DWCH-Datawatch Worth Watching!

DWCH 13.10

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Dec 13 4:00 PM EST

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To: Mike 2.0 who wrote (100)	3/2/1997 5:54:00 PM
From: TJK	of 462

Mike, The following is an email response which I received from Marc Peterson (VP of Marketing and Product Development) today. It seems that Datawatch's royalty arrangement with Math Strategies may be the most effective way to continue to develop an outstanding product. It seems as though the royalty may be ~10% of Sales. This shouldn't ever become a drag on future earnings growth considering the large gross margins which DWCH realizes. "Math Strategies is paid a royalty by Datawatch as a flat percentage of Monarch net sales. The $1.9 million royalty figure reported for fiscal 1996 includes (1) Monarch royalties, (2) royalties paid to Workgroup Systems for North American sales of Q-Support prior to the Workgroup acquisition, and (3) Virex royalties paid to a developer who contributed a portion of the Virex code. Approximately 2/3 of the royalty amount is attributable to Monarch. This is obviously a significant amount. On the other hand, the royalties fund ongoing development of Monarch by a team of very productive programmers. The programmers and associated overheads would represent a big expense to Datawatch if the development effort were brought in house. Royalty-based development may be marginally more expensive, but royalties give our developers a tremendous incentive to develop great code on an accelerated basis. Please be assured that our agreement with Math Strategies gives Datawatch an exclusive world-wide license to Monarch and all Monarch derivatives. Under the agreement, Math Strategies cannot license Monarch or derivative software to anyone else. Math Strategies is permitted to resell Monarch (purchased from Datawatch) on the same basis as other resellers." Marc Peterson Vice President of Marketing and Product Development DATAWATCH CORPORATION (You may post this information to the Silicon Investor web site if you wish. Thanks for your inquiry.)

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