Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : RATIONAL SOFTWARE- BUY OR HOLD -- Ignore unavailable to you. Want to Upgrade?

To: Randy Ellingson who wrote (2804)	1/20/1999 6:23:00 AM
From: Thomas Haegin	Respond to of 3115

<< Which tends to command higher profit margins in this field, product or service? >> Good question, I don't know the answer. What I did notice though in the latest income statement is that RATL increased their service revenues but the cost of service revenues staid pretty much the same... What could be the reason for this? All service people now trained? More profitable projects being pursued by the service force? Maybe RATL indeed can leverage the service side more if they "give away" the basic product more cheaply. greetings from a very pleased Thomas

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