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

To: Hans-Erik Eriksson who wrote (2926)	6/7/1999 1:01:00 AM
From: Asymmetric	Read Replies (1) \| Respond to of 3115

AIM's Scavone Finds Y2K-Immune Software Stks By Maria V. Georgianis / June 2, 1999 NEW YORK (Dow Jones)--Trying to find a software company that's immune to a year 2000-related spending slowdown is no easy task. But AIM Management Group Inc.'s Charles Scavone believes some small-cap software names fit the bill. Software comprises about 6% of the $303 million in assets in the AIM Small Cap Opportunities Fund, which Scavone oversees as lead manager along with three colleagues. Technology is the fund's largest sector, at 37% of assets. The fund is up 10.2% year-to-date. Scavone's software picks include Macromedia Inc. (MACR), Clarify Inc. (CLFY), Rational Software Corp. (RATL) and Mercury Interactive Corp. (MERQ). While each targets different markets, they share above-average earnings growth. Macromedia, Rational and Mercury are all estimated to have a secular earnings growth rate of 35% through 2002, above the 23.4% growth estimated for the software sector, according to First Call Corp. Clarify's secular growth is estimated at 50%. In addition, "all of these companies in the most recently reported quarter commented that the year 2000 (issue) is not slowing their business down," Scavone said. The approaching millennium has posed difficulties for many software companies as it leads their customers to defer spending on new products in favor of Y2K remediation. The senior portfolio manager likes Macromedia, a core holding since the fund was started last June, for its "very solid position" in creative tools for the World Wide Web. Macromedia's products "put them in a position to do well as the Internet continues to proliferate," Scavone said. Macromedia, of San Francisco, beat earnings estimates for the last seven quarters, and has more than 61% earnings growth projected for its fiscal 2000 ending next March 31. Rational Software was the fund's second largest holding, or 1.71% of total net assets, as of April 30. The company has "the best suite of products for software development," according to Scavone. Rational's products allow businesses to write custom software quickly by reusing lines of code. Rational, of Cupertino, Calif., beat earnings views in the last three quarters and is targeted to increase its earnings by about 41% this year, according to First Call. The year 2000 computer glitch could actually be a plus to Rational, according to Scavone. After customers are complete with their year 2000-related projects, there will be "an enormous pent-up demand in new software development," he explained. Clarify, Rational and Macromedia all have outperformed Scavone's year-to-date 10.2% return, gaining, respectively, 30.4%, 20.3% and 19.9% year to date. Scavone is short on several software stocks, however, including Lernout & Hauspie Speech Products N.V. (LHSP), a developer of speech technology software, and i2 Technologies Inc. (ITWO), which focuses on supply-chain management software. Lernout & Hauspie, of Belgium, risks having its products "commoditized" by others, Scavone said. Earnings estimates on the company have also been coming down, he noted. i2 Technologies, of Irving, Texas, runs the possibility of its growth being slowed by the year 2000 glitch, Scavone said. The company's software is a high ticket item and as such could be prone to a Y2K-related slowdown, he said. -By Maria V. Georgianis; 201-938-5244; maria.georgianis@dowjones.com