The Investment Column: RM thrives on classroom IT

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The Independent Online
League tables, parental choice and a Labour government intent on hooking up every child in the UK to the Internet mean schools are starting to take information technology seriously.

Teachers still spend less than one per cent of their budgets on educational information technology, but total spending on computers and software in schools has risen six-fold in the past ten years and is accelerating.

Happily for its investors, RM is at the forefront of taking IT into the classroom. Shares in the company, which floated at 175p in 1994, have powered ahead as the company continues to take market share from its only real rival - the Acorn/Apple joint venture.

Shares in the company held firm at 920p, despite yesterday's caution that next year's interim profits would be lower than last year due to an extra pounds 750,000 RM is ploughing into new products and that pounds 100m of the government money which is committed to educational IT will not be available to schools until RM's second half.

Nobody worried too much either that Mike Fischer, RM's founder and chief executive for 24 years, is stepping into a non-executive role.

The focus was more on RM's increasing market share in primary and secondary schools. Unlike Acorn/Apple, RM's software is based on the universal Microsoft operating system. It also sells directly to teachers rather than through agents, allowing it to step in quickly to offer new products.

Though hardware, a low-margin business, still represents over 60 per cent of the group's revenues, RM's services and software divisions are growing much faster. RM also moved early into the Internet, with over three-quarters of the market in network connections.

Credit Lyonnais Laing has tweaked 1998 forecasts down from pounds 10.2m to pounds 9.5m. That puts the shares on a steep 40 times earnings. Long-term growth prospects remain good.