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

To: Hans-Erik Eriksson who wrote (2917)	4/20/1999 10:09:00 AM
From: Bob Howarth	Read Replies (1) \| Respond to of 3115

Anyone know why this stock is completely falling apart? Was there a downgrade or something? Thanks in advance.

To: Hans-Erik Eriksson who wrote (2917)	4/30/1999 11:18:00 AM
From: Asymmetric	Respond to of 3115

Hambrecht & Quist: Rational Caps Off Resurgent Year with Strong Q4 April 16, 1999 Recommendation: Buy Rational posted a strong fourth quarter that exceeded expectations on all fronts. Revenues of $125 million and EPS of $0.23 beat our $118 million and $0.21 forecast decisively. E-business continues to be a significant demand driver for Rational's products and the recently unveiled suite strategy contributed well beyond the company's own aggressive expectations. We are raising estimates modestly (minor revisions to guidance) and we reiterate our BUY recommendation. ....................1999 A...2000 E.....2001 E .......Q1 EPS...$0.09.....$0.14.....$ .......Q2 EPS....0.14......0.19 .......Q3 EPS....0.19......0.24 .......Q4 EPS....0.23......0.32 .......FY EPS....0.64......0.90......1.17 .....FY REVS (M)..411.8...535.0.....695.5 .......CY EPS....0.81......1.08......na .......CY P/E....34.9......26.1......na FY Ends Mar Current Price $28.25 52-Week Range $10-35 Market Cap(M) 2640 Shares Out(M) 93.5 Book Value $3.15 Net Cash/Share $2.78 3-Year EPS Growth 30% CY00 P/E-to-Growth 87% Yesterday, in an upbeat conference call, Rational reported strong March quarter results. Rational's March quarter featured accelerating revenue growth of 43%, compared to 33% in the December quarter and 12% in the year ago period. Record sales of $125 million were fueled by strong demand across all product categories, with notable contributions from newer initiatives like Rational Suite 1.0 and PerformanceStudio. Balance sheet performance was excellent, with DSOs of 66 days down from 74 in 4Q98 and in-line with the 65-70 day target. Cash flow from operations was a strong $40 million, raising cash per share to $2.78 from $2.43 in the December quarter. Rational's new suite strategy, unveiled in early February, has already begun to bear fruit, exceeding what was described as an aggressive internal forecast. Including all four suites, Rational signed up over 300 customers in the March quarter. As we confirmed in our recently published channel survey (April 12, 1999), customers find the suite strategy compelling, drawn in by the notion of one-stop shopping and integrated category-leading productivity software at attractive price points. While Rational will continue to offer individual products, it is clear that the more lucrative opportunity lies in suites, with greater account penetration potential and higher ASPs. Accordingly, it is likely that management's intention to focus aggressively on expanding this strategy will allow Rational to deliver even more compelling growth going forward. Demand for e-business solutions contributed to solid sales for PerformanceStudio, Rational's load testing product announced in September 1998. Customer wins in this area include Sun, Hewlett-Packard, Fidelity, Nokia, Boeing, and America Online, among others. With an upgraded version due out mid-year that will offer some Web-oriented feature enhancements, management expressed confidence in achieving triple digit growth for PerformanceStudio in FY2000. On the conference call, management expressed a strong sense of confidence in the business and visibility into fiscal 2000. In our mind, it is clear from the strong FY99 performance that Rational's early gamble on the Internet has indeed begun to pay off as enterprise customers seek to harness the power of the Web and e-commerce. Rational's broad portfolio of products and multi-faceted growth strategy affords the company the distinct advantage of exploiting this trend from several angles including testing, modeling and configuration management. We are raising our fiscal 2000 estimates to $535 million and $0.90,up from $530 million and $0.88. Furthermore, we are instituting fiscal 2001 estimates of $695 million and $1.17, reflecting our belief that Rational is well equipped to deliver 30% growth over the next few years.

To: Hans-Erik Eriksson who wrote (2917)	6/2/1999 12:37:00 AM
From: Asymmetric	Read Replies (1) \| Respond to of 3115

Channel Check Indicate Strong Business Momentum (Dain Rauscher, May 17) We had the opportunity to speak with several Rational VARs and salespeople and believe business continues to be strong. As expected after Rational's seasonally strong year end, VARs reported that April slowed slightly from March, but business momentum in May has returned to previous strong levels. We have accounted for this seasonality as our fiscal first quarter estimates of $110.8 million in revenues and EPS of $0.16 are sequentially significantly lower than fiscal fourth quarter results of $125.1 million and EPS of $0.23. Suite Strategy Continues to Gain Acceptance Recall that 300 Rational customers purchased a suite in the fiscal 4th q., significantly exceeding expectations and resulting in an increase in ASPs. Our concern that this was a one-time event due to attractive upgrade prices (we believe the sliding Suite pricing scale for exisiting customers is now at 75% of list price) for exisiting Rational customers has been relieved as the sales channel did not see a rush to upgrade and that customer interest in Suites continues to grow. Suites began shipping Feb 11, and large customers for which the Suite offerings make the most sense often are decentralized and do not have the flexibility of making changes to make multi- departmental purchasing decisions quickly. This leaves a large base of exisiting Rational customers that will likely be evaluating the attractive value proposition of the Suite offerings over the next several quarters as new development projects are started. Furthermore, we believe the Suite offerings will be attract the attention of new customers that struggle with the alternative of multi-vendor point product approach to software development, although we believe sales cycles will lengthen given the larger dollar figure involved, but once signed, will provide better recurring revenue streams. Suite customers are reporting that the benefits of data sharing and communication during a software development project due to the integration of Rational's major point products brings the never before ability to approach software development with a formal planning process, significantly reducing complexity and increasing the chances of successful projects. SSL Support For Performance Studio VARs report that customer interest in Performance Studio, a Web-based multi-tier testing solution that integrates functional and load testing capabilities, continues to accelerate. This quarter, Rational introduced Secure Socket Layer Support for Performance Studio, enabling the product for testing of e-commerce applications, a highly sought after feature given the obvious importance of ensuring commerce-related Web performance and security. Given the large amount of Internet related software development projects, we believe this product will continue to sell well throughout the next several quarters. VARs also reported that there is strong customer demand for TeamTest 7.1 as the new release importantly supports Visual Basic 6.0, which has been widely adopted by programmers for Web-related development. ...We are please that Rational is ramping its services organization to support the strength in product licensing. Stock Opinion We believe Rational has an enviable position in the software tools market and is well positioned to be a leading beneficary from the expansion of e-commerce and Web-related programming efforts. The company is executing its plan to offer product development suites, and the company is ramping services to support its strong product sales... (usual disclaimer follows of do your own diligence, etc.) Any further thoughts, Hans? Regards, Peter.