Results reflect a stability that impressed markets, writes Jamie Smyth, Technology Reporter.

Following two years marked by profit warnings, ballooning losses and job cuts, the Dublin-based software firm Iona Technologies finally stabilised its financial performance this week.

The company's share price initially spiked 25 per cent higher as Iona cut its quarterly loss to just $2 million (€1.7 million) and signalled that revenues would rise between 5 and 15 per cent in the fourth quarter. The market was also impressed by an announcement that Iona had sold a new software product called Artix to several companies ahead of its official launch next week.

Zurich Insurance, Sprint and Bell South, all existing customers of Iona, have bought the product. This accounted for 5 per cent of Iona's third-quarter revenues and raised hopes of buoyant future sales.

"Ten years ago, Iona pioneered a software revolution with its Orbix product based on Corba technology, which enabled different types of software to work together," says Mr Chris Horn, Iona's founder, who returned as chief executive in May this year following the departure of Mr Barry Morris.

"The Artix family of products goes further by enabling firms to renovate their existing software and also deploy the latest Web services technologies," he says.

Artix is a family of four products that will enable firms to continue to use existing legacy systems by linking them to new platforms based on different software standards. Firms will also be able to deploy Web services to their networks regardless of the software, as Artix integrates most standards such as Corba, MQSeries, Tuxedo and TIBCO.

Most analysts have welcomed Iona's strategy to seek out new revenue streams, as sales of its base Corba products slow. They have also welcomed the return of industry veteran Mr Horn to lead Iona at such a crucial time.

"It brings more stability to the company and a sense of focus," says Mr Erick Brethenoux of investment house Lazard.

Goodbody Stockbroker's technology analyst Mr Gerry Hennigan, says Mr Horn's relationship with Iona's existing Corba customers and his different strategic approach should help the firm.

"The biggest change is that Barry \ had a very aggressive approach and wanted to position Iona as a broad middleware vendor, whereas Chris has a narrower strategy and wants to position Iona as a niche player."

"I do think that Iona is more likely to hit profitability through Chris's approach. In a downturn it is more difficult to compete with the IBMs and BEA Systems."

Mr Horn now admits that Iona got ahead of itself in the frenzy caused by the dotcom bubble.

"I stepped down in May 2000 during the middle of the hype of the dotcom era... and I think we got caught up in the excitement."

Under Mr Morris, Iona invested heavily in technology to develop software for what was considered the "next big thing" - Web services. Unfortunately in the current depressed economic climate, firms have been slow to buy into this new technology.

Web services are types of distributed applications that run on particular Web servers, but which can be called up from general Web pages. They enable firms to offer a range of different services over the internet, such as downloading music or films.

Firms have not been spending on these new products, says Mr Horn, who admits technical difficulties and bickering among the software industry have delayed the uptake of Web services.

"The good news is that for the first time ever, all the leading players in the software industry have endorsed one standard. But there is not a lot of money to be made from the base standard. The real value is for the higher value Web services products for which no definition has yet been accepted by firms."

Mr Horn refers to the "absolute warfare" between the two main standards associations and the big vendors Oracle, Microsoft, Sun. This may lead to fragmentation and delay uptake of Web services further.

But Mr Horn says the business climate is changing for the better.

"Six to nine months ago it was very difficult to even get an audience with a company, given that they were going through such difficult times themselves, what with restructuring and job cuts."

But over the past three months Mr Horn has been on the road meeting the investment officers of key enterprise customers, and, crucially, making software sales.

This week's results detailed 16 software sales worth between $250,000 and $1 million and one sale worth over $1 million. Iona did not achieve a single $1 million-plus deal in the prior quarter.

But a question mark remains over Iona's ability to succeed as an independent entity. One analyst said it would take several quarters to demonstrate Iona had a viable future. He also noted that no acquirer had appeared during Iona's difficult two-year period.

Mr Pat Duggan of Dolmen Butler Briscoe is advising clients to take profits on Iona given the limited growth potential.

But Mr Brethenoux of Lazard is more optimistic.

"I think Iona does have a future on its own but it would also be a good buy for one of the larger technology vendors such as Oracle or IBM."

"If you accept the market will recover over the next year then Iona is well placed," he says.

Mr Horn, who owns 7 per cent of Iona's shares, says one of Iona's key strengths as a firm that develops integration software is that it is neutral when compared to the other big vendors. But he has not ruled out selling the firm if an opportunity comes along.

"The board is open-minded and will look at all opportunities to assess what is right for shareholders, staff and customers," says Mr Horn, while stressing that nothing is imminent.