Iona hit by cut in IT spend

4 Apr 2003

Iona Technologies CEO, Barry Morris, last night confirmed that anticipated poor results in Iona’s first quarter results were driven by a clampdown on IT spending in the US banking and telecoms market.

In preliminary results posted yesterday before the full-quarter results are posted on 16 April, Iona expects to report total revenues in the range of US$16.5m to US$17m for the quarter ended 31 March. This contrasts harshly with revenues of US$30.9m in the last financial quarter. The company is anticipating a net loss per share of between US$0.34 and US$0.36.

In what is already a troublesome start to a new financial year, Morris told an analyst/press conference call yesterday evening that of the revenue figure he expected a licence revenue of around US$7m. “The first quarter is seasonally down and we did not anticipate any radical change in customer behaviour. The reality is they are spending less and have been delaying purchasing decisions.”

Morris said that the telecoms and banking sector, which represents over 60pc of Iona’s revenue mix, were hit the worst, driven by “anaemic spending, further exacerbated by the global geo-political situation.”

“Even government spending on IT has been poor. We saw delays when IT budgets were reallocated to other agencies and departments due to the geo-political climate,” he said. “My responsibility is to return Iona to profitability and that will be achieved through managing our cost base.”

Iona’s chief financial officer, Dan Demmer, highlighted the bleak landscape in which Iona is currently operating. “We saw a drop in licence sales across the board and a drop in demand for CORBA predominantly in the US and the Americas, across the telecoms and banking areas. Licence sales are down 60pc from the fourth quarter last year.”

Demmer highlighted the reduction in IT deals being done. “Typically in the enterprise deal space we conduct transactions of between US$250,000 and US$1m. We have only won six such deals this quarter, where we would normally be doing 20 such deals in a quarter.”

However, Demmer emphasised that Iona Technologies is still financially secure, with a cash balance of between US$74m and US$75m.

Morris was upbeat on the future demand of new Iona integration products such as Inferno and web services: “Inferno addresses critical and costly business processes and the pipeline for this product is growing faster and faster. Once spending levels on IT return to normal, people will buy integration products for a quick return on investment. We are also encouraged by demand for next generation web services.”

He acknowledged a decline in demand for its CORBA products. “Iona has been a leader in CORBA, but while it’s not a fast-growing market, it has a solid base of customers. We see the future in the form of web integration products and we are confident that we will take the actions necessary to capitalise on the opportunities for long-term growth and success.”

By John Kennedy