Datalex, the Howth-based travel software group, is the latest Irish technology company to suffer from the downturn in the sector with sales in the second quarter down from $7.9 million to $7 million.
Datalex is also taking a $1 million bad debt charge in the quarter and is planning a substantial cost reduction programme which will be announced with the second quarter results on August 8th. The Datalex statement did not indicate how costs will be cut, but analysts believe that some jobs may be lost as the company adapts to the lower level of business.
Not surprisingly, Datalex shares fell heavily on the Dublin market and closed down 30 cents on a new low of $1.20, after earlier trading as low as €1.15. This compares with a flotation price last October of €6.84 and the €11.69 reached after the flotation. On Nasdaq, the shares fell by one-third to $2.20 although trading in the shares in both markets was tiny.
Two investors who have suffered a quick loss as a result of the collapse in Datalex shares in recent weeks are ICC Venture Capital and Mr Dermot Desmond's IIU. ICC bought 874,050 shares from Datalex chief executive, Mr Neil Wilson, at €1.85 each in late May while IIU bought 100,000 shares from Mr Wilson at the same price.
Mr Wilson said: "There is increasing evidence that we are witnessing a temporary decline in the demand for our solutions due to the weaker macro economic conditions that are having such an adverse impact on the wider IT sector."
He said that the second quarter revenues had been hit by delays in decisions on contracts by some of Datalex's customers and lower than expected revenues from existing contracts. But ominously, Datalex is also making a $1 million bad-debt provision in the second quarter results.
Mr Wilson stated: "The downturn in funding prospects for early-stage IT companies has also impacted on some of our customers and in certain cases it has been necessary to take action to terminate these contracts on account of an increasing credit risk."
He said, however, there has been some improvement in recent weeks but warned that until revenue visibility improves based on actual contract signings rather than estimates, the group is cautious about the outlook for the rest of the year. Mr Wilson said that Datalex is still committed to reaching profitability early next year.
