Shares in Iona Technologies almost halved in value yesterday following an announcement that it would report larger than expected second-quarter losses later this month due to a significant slump in software sales.
The firm, which develops software that enables businesses to link their IT systems together, is now likely to post its first annual loss and could become a takeover target for other firms. Dublin-based Iona, valued at more than €2 billion during the dotcom boom, also confirmed it would cut more jobs to reduce operating costs and return the company to profitability.
Mr Barry Morris, chief executive of Iona, told The Irish Times yesterday the firm was operating in a very bad economy and it was not getting any better in the sector.
"Customers are getting extremely tight with their IT budgets," said Mr Morris. "It's not cancellations or losses to competitors that are hitting us, rather its delays in orders."
He said the firm had experienced difficulties with its sales in the European region and the "execution" of the Iona sales force could have been better. But the company's main competitors had also missed their own revenue expectations, said Mr Morris.
Some analysts disputed this assessment of Iona's performance. Mr Barry Dixon, technology analyst with Davy Stockbrokers, said the figures suggested Iona was losing market share against its competitors in Europe. He said the firm might become a takeover target because its market capitalisation had fallen below its cash balances of $100 million (€100.78 million) at a point during yesterday's trading.
Iona's shares fell sharply following news that it would report a pro-forma loss, excluding charges, of 47-49 cents a share, compared with analysts' average forecast of a loss of five cents a share.
In early trading the stock was down 46 per cent at €3, before recovering slightly to close at €3.20, down from its previous close of €5.60. This values the firm at €103 million, well below its highest market capitalisation of €2 billion recorded in March 2001.
Iona, which employs 825 staff worldwide, with a quarter of these based in Dublin, also indicated it would have to make more staff reductions. This would be Iona's third successive restructuring plan since May 2001, when the company employed about 1,300 staff.
The firm wants to reduce its cash-burn rate, which was $2-$3 million during the first quarter, but which will be about $15 million in the second quarter.
Mr Morris could give no indication of the number of staff that will lose their jobs, but said Iona's Dublin operation might escape the worst of any cuts because of its status as a development centre.
Iona will take a $7.5 to $8 million restructuring charge in the second quarter from the cost of reducing its workforce and consolidating its offices. The full second-quarter figures will be released on July 17th and the company expects revenue of $26-$26.5 million.
