Viasec, the Donegal-based software company in which Eircom has a strategic interest, will be put into liquidation with the loss of 50 jobs.

The company, which employed more than 30 people in Donegal town, two in Germany, four in London and 12 in Boston, had been trying to raise funds to continue in business but was unable to.

The decision to wind up the company was taken at a Viasec board meeting yesterday.

The directors will meet on Monday to prepare a statement of affairs and to appoint a liquidator. Finance director Mr Gerry McDevitt told The Irish Times that the company had run out of money.

Staff were put on notice last month that the firm, 30 per cent owned by Eircom, had run into difficulties.

They were told Viasec could not pay their wages because of cashflow problems but were assured this was a short-term problem.

The company had been seeking to raise up to £5 million (#6.35 million) in venture capital. The fund raising was being arranged by Merrion Capital and Harvest Finance. This deal was to be finalised at the end of January. The funds - believed to be £5 million - were to be used to expand its sales force and raise the firm's presence in the US market.

Eircom is understood to have indicated two years ago to the company that it did not want to increase its investment. Eircom had originally given a loan of around £2.5 million to Viasec which was later converted into equity representing a 30 per cent stake.

The company's founder and managing director, Dr David Doherty, yesterday told staff the company was closing. Claims for wages or expenses owed to staff who have not been paid since before Christmas will have to be directed to the liquidator who will sell the company assets.

The news comes at a time when Internet and software companies are finding it difficult to attract investor funds because of falling stock market valuations. It follows the collapse of Ebeon, the technology company which was 51 per cent owned by Eircom. It folded with the loss of 170 jobs after Eircom decided not to provide further funds to the company.

Viasec develops security software for e-mail and has been in business for five years. Enterprise Ireland has a small shareholding in the company.

Viasec has invested substantially in research and development since its inception and had been due to introduce a security software product shortly. The firm has been loss making and is said to have been struggling to achieve sales targets.