IONA ($15-$12)..PE Zero..M/C 358..comes in in~line and warns...
Wednesday April 17, 12:40 pm Eastern Time
Reuters Business
Iona says recovery to be slow in 2002
(releads with shares lower, adds background, analyst comment)
By Alex Richardson
DUBLIN, April 17 (Reuters) - Irish software company Iona Technologies (NasdaqNM:IONA - news) on Wednesday said second-quarter revenues would fall below market expectations and that recovery in its markets would be slow this year, pushing its shares down.
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The company also posted a drop in first-quarter revenues, in line with expectations, to $39.5 million from $42.7 million in the first three months of 2001.
It predicted second-quarter revenues of $40-$43 million, slightly below consensus forecasts of around $44 million.
Iona, whose software allows companies to integrate different computer applications and systems, has suffered along with other information technology companies as tough economic conditions have forced customers to slash budgets.
``We've consistently indicated the recovery in IT spending will tend to lag the recovery in the economy... (and) what we are seeing out there is tight budget management from IT executives,'' Iona Chief Executive Barry Morris told Reuters.
``Looking forward for the rest of the year, the big variable is the economy and consequently what happens with IT spending, and I can't predict that. We'll manage the variables we have control of.''
Iona's shares were down 13.3 percent at $13 on Wall Street at 1633 GMT. In Dublin, where trading volume in the stock is lighter, it closed down 4.65 percent at 15.80 euros.
``The company met first-quarter estimates but was far more cautious on the second quarter, and we would now expect to see some trimming of the full-year numbers,'' said Dublin-based technology analyst Jemma Houlihan of ABN AMRO.
A surprise profit warning earlier this month from one of its main competitors, International Business Machines Corp (NYSE:IBM - news), highlighted the difficulties facing the sector.
BOTTOM LINE
Iona recorded a first-quarter pro forma loss of $2.4 million, or $0.08 per share, compared with earnings per share of $0.15 for the first quarter of 2001.
Pro forma losses exclude amortisation of purchased intangible assets as well as stock compensation and associated tax effects.
``There's nothing speculative going on; it's all required investment, and the reason we feel we've shown some good results today is that our products fit in exactly those strategic mission critical situations that they really need to invest in,'' Morris said.
For the second quarter, Iona forecast a pro forma loss per share of $0.02-$0.06.
``We intend to maintain roughly the same expense levels because we are investing for the recovery, which will come in due course, and it's not my goal in Q2 to pressurise the expense line in order to show some small profitability,'' said Morris.
Iona sold around 5.5 million shares in a secondary offering during the first quarter, raising $60-$70 million.
``We emerged from the quarter with around $111 million in cash as a result, which puts us in a very strong position going forward,'' said Morris. ``At this time in the industry cash is king and that was a big thing for us.''
The company said the quarter had also seen it complete a record nine deals in excess of $1 million.
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