The surprise profit warning from IBM could signal tough times ahead in market conditions for Irish companies Iona and Riverdeep, but the impact will not be clear until the underlying reasons for the IBM warning are established.

While the IBM warning cited "a continuing slowdown in customer-buying decisions in the first quarter", some analysts said it could also reflect the arrival of a new chief executive, Mr Sam Palmisano, and changes in financial reporting methods.

With Iona and Riverdeep due to report this month, ABN Amro analyst Ms Jemma Houlihan sees the warning as more negative for Iona. IBM, together with BEA Systems, is the market leader in the web services and integration software markets in which Iona competes.

Indications that the market leaders are experiencing problems now or could start discounting prices are bad news for the smaller company, she says.

Following the recent share placing, the Iona share price is fully valued and she advises against buying the shares ahead of results due on April 17th. While there are positive and negative pre-results announcements from Iona competitors, Webmethods and Vitria respectively, she sees the absence of a pre-results announcement from Iona as a positive.

Riverdeep has a closer relationship with IBM as a shareholder and distributor. The US company has a 7 per cent stake in Riverdeep and is a major distributor for its indirect school's business.

While Ms Houlihan warns that the strong growth of more than 50 per cent per quarter over the last few quarters that Riverdeep has enjoyed through the indirect IBM channel can no longer be taken for granted, she rates the shares as a buy at up to $22 per share ahead of the results due on April 30th.