Rational Optimistic Despite Down Quarter

Software development toolmaker Rational Software Corp. saw third-quarter earnings and revenues drop, but officials, pointing out that the numbers exceeded analyst expectations, said they were optimistic that an economic turnaround was near.

For the quarter ended Dec. 31, 2001, the Cupertino, Calif., company announced it had posted a net loss of $17.9 million, or 9 cents a share. During the same quarter last year, Rational earned $26.5 million, or 13 cents a share.

Chairman and co-founder Paul Levy, in a conference call, said the companys $170 million in revenue beat consensus estimates of $167 million.

“Third quarter bookings were up, giving us better visibility and a strong backlog going into the fourth quarter,” Levy said. “We may be seeing a turnaround in major markets.”

He said tools for enterprise business applications accounted for 35 percent of the companys third quarter revenues, infrastructure application tools accounted for 40 percent, and embedded systems and devices tools accounted for 25 percent.

In addition, despite the struggling economy, Rational did more transactions worth $1 million or more than it did last quarter, Levy said. The company did 29 such deals, compared to 15 last quarter.

“We completed 15,000 transactions with 7,000 customers” during the third quarter, he said. And the average third-quarter transaction was worth $13,000, compared to $10,000 for the second quarter, he added.

“The conclusions is that our business may be stabilizing in markets we focus on … signaling a recovery may be ahead,” Levy said.