Rational Narrows Loss in Third Quarter

The Cupertino, Calif., company narrows its losses to $3.56 million from $17.9 million a year ago.

Rational Software Corp. reported its fiscal third quarter 2003 earnings Thursday, showing a narrowing of its losses to $3.56 million down from $17.9 million a year ago.

The Cupertino, Calif., company, in the process of being acquired by IBM in a deal worth about $2.1 billion, said an increase in large sales and average sales, along with a decrease in expenses, helped to cut the losses.

Rational reported revenue of $162 million for the quarter ended Dec. 31, 2002, down from $170.2 million for the same period a year ago.

"We are pleased with the results for the quarter, particularly in light of the proposed acquisition," said Tom Bogan, Rationals president and chief operating officer, during a call with analysts and press. "Deals in excess of $1 million more than doubled and the average deal increased," he said.

David Henshall, Rationals chief financial officer, said the company saw deals 13 deals worth $1 million or more during the quarter compared to six such deals the quarter before; the company also said it saw 26 deals of $500,000 compared to only 15 the quarter before.

Bogan said that since the announcement of the acquisition on Dec. 2, Rational has been working on several "integration issues" in merging Rationals products into IBMs product family. He said a shareholder meeting to vote on the deal will be held next Wednesday.

Mike Devlin, Rationals CEO, said he has been meeting with customers and partners. "Their response to our announcement [of the IBM acquisition] has been overwhelmingly positive. To deliver in-line results is exceptional in these times."

Devlin also said during the call that Rational will continue to support all of its existing platforms—Windows, Java and .Net—while increasing support for Linux and maintaining support of BEA Systems Inc.s WebLogic application server environment, which competes with IBMs WebSphere.