Iona profit warning shocks the market

Iona Technologies shocked markets yesterday with a dramatic profit warning just a fortnight ahead of the publication of first- quarter figures.

The company said sales in the first three months of 2003 would come in somewhere between $16.5 million (€15.4 million) and $17 million, down about a third from its own earlier projections of $24-$26 million.

It expects to record a loss of somewhere between 35 and 37 US cents per share, up to three times the previous target of an 11-15 cent per share loss.

Iona blamed the faltering economic recovery and uncertainty over war in Iraq for the decline in business."We did not anticipate the radical change seen in our customers' spending behaviour from even three months ago," chief executive Mr Barry Morris told analysts in a conference call.

Shares in what is seen as Ireland's flagship technology firm fell to an all-time low in heavy trade on the US Nasdaq index following release of the trading statement. They tumbled more than 35 per cent to close at $1.39, with more than six times the average daily turnover recorded.

Mr Morris and chief financial officer Mr Dan Demmer said the company's US market was particularly weak, especially the telecoms and banking sectors, which together account for about 60 per cent of revenues.

They indicated that they would again restructure the business to "align the cost base with revenues".

Analysts said such a move was likely to lead to further job losses at the company, which employs around 620.

Full details of the restructuring will be announced with the first-quarter figures on April 16th.

Mr Morris said Iona would make no forward projections until the formal announcement of the first-quarter figures.

However, analysts were sceptical that Iona could quickly turn around its current situation.

Yesterday's announcement was Iona's third profit warning in three years, following one in the second quarter of last year and another in 2001.

Mr Barry Dixon at stockbroker Davy drew particular attention to the slump in licensing revenue which, at $6.5-$7 million, and is likely to contribute less than half expected revenue. "Licensing has been a high-margin area for the company and it remains to be seen how fast revenue will recover," he said.

Analysts are certain to downgrade their projections for the company but most said they would wait until the formal figures and details of any restructuring before issuing precise guidance.