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Rational cuts jobs, earnings targets

Rational Software expects to report a little less fourth-quarter revenue than analysts predicted, sees lower expectations for fiscal 2002 and plans to cut about 400 jobs.

After market close Tuesday, the maker of software-development tools said it sees fiscal fourth-quarter earnings of 20 to 22 cents per share, on revenue of $240 million to $245 million. Analyst consensus predicted a profit of 22 cents per share on revenue of $249 million for Rational's quarter ended March 31, according to earnings tracking firm First Call.

Company executives reduced their financial targets for the current fiscal year. Rational (Nasdaq: RATL) now sees earnings of 70 to 72 cents per share, on revenue of $813 million to $818 million. First Call consensus was predicting a 2002 profit of 86 cents per share on revenue of $1.13 billion.

The company said it would take a one-time charge of $20 million to $25 million in the second quarter to pay for the elimination of 400 jobs, or about 10 percent of the company's work force.

Shares of Rational traded at $12.25 in after-hours activity on the Island ECN immediately following the release of preliminary results. Rational shareholders may have been primed for bad news; the stock fell $3.13, or more than 18 percent, to $13.94 in Tuesday's regular trading before the news was announced.

Among nine Rational analysts polled by First Call, earnings estimates ranged from 21 to 23 cents per share.

Rational joined the chorus of companies blaming their financial woes on a U.S. economic slowdown.

"The recent macroeconomic conditions have caused customers to become increasingly cautious with regards to purchase decisions--including technology ones--and this has affected our business as it has many other companies," said Paul Levy, co-founder and chairman of Rational. "We are taking immediate actions to scale our costs to match the current business environment."