Rational Software Corp posted strong second-quarter earnings on the back of continued growth in the e-business market. The Cupertino, California-based provider of application development tools and services reported net income up 58.4% at $19.3m as sales revenue 35.4% to $128m. Earnings per share jumped 50% to $0.21, beating Wall Street estimates by a penny. Revenue also topped consensus by about $4m and operating profit of $24.4m beat estimates of about $23m.
Rational estimates that 80% of its business is now internet- related, as clients looking to build applications for e-business, e-infrastructure or internet devices have increasingly turned to the company’s software. Product revenue rose 34.8% year-over-year to $77.8m and consulting revenue grew 36.4% to $50.4m. Gross margins rose to 85.2% from 84.3% in the year-ago quarter and product license margins topped 93%.
Rational said it booked 150 deals during the quarter worth $100,000 or more and about 2,000 worth at least $10,000, taking its average deal over $10,000 for the first time on the strength of the Rational Suite. The Americas accounted for 60% of orders in the quarter, with Europe providing 30% and Asia-Pacific 10%, the latter showing 100% growth year-over-year. The company said its top 10 customers accounted for 20% of bookings in the quarter.
For the six-month period, net income rose 68.4% to $34m on revenue up 38.3% at $245.6m, while EPS rose 63.6% to $0.36. The company finished the quarter with cash and equivalents of $266.4m, up from $259.8m as of March 31.
Rational says it is exiting the quarter with excellent bookings and visibility into the coming quarters. It has accordingly upped its revenue guidance to analysts for fiscal 2000 from $525m-$540m to $540m-$550m. It also raised EPS guidance to $0.91- $0.92 from $0.88-$0.91. In fiscal 2001, the company now projects revenue of $695m-$710m and EPS of $1.15-$1.18. á
