Shares in the Irish software company Iona Technologies plummeted yesterday after the firm issued a profit warning. By the end of trading the share price, which closed on Wednesday at $30.38 (#28.19), had dropped to $14.81 (#13.70), a fall of over 50 per cent. A massive 3.6 million shares changed hands compared to an average daily turnover of 150,000.
In a statement, Iona said its first quarter net profits would be "below the company's expectations . . . between a loss of three cents per share and break-even". This compares with net income of 10 cents a share for the first quarter of 1998. Iona said sales would be between $20.8 million and $21.5 million, also worse than expected.
The company blamed the failure of its sales team to close a number of large deals and said this was the result of a reorganisation of its sales force. Iona also said it had run up exceptionally high expenses, due to aggressive hiring in sales and product development, and a new corporate branding initiative.
"I am not satisfied with our results this quarter," said the company's chairman and chief executive, Dr Chris Horn. "Nonetheless, Iona Technologies is a strong company with an enviable market position. We remain confident in our strategy for growth and in the outlook for the middleware market."
With shares in the company losing half their value after three hours of trading, analysts said they were dissatisfied with the amount of information released by Iona executives during a conference call.
"Iona is saying it is purely an internal problem, but the market isn't quite buying that," one analyst said.
"Management certainly weren't on top of why it was they came up short," another remarked. "This wouldn't inspire confidence in the company. It would have been much better if they could have quantitatively gone through where they went wrong. There has to be a degree of cynicism about the day they chose to release these figures."
But most predicted there would be no repeat of the CBT pattern, where US-based momentum investors ditched the share, reducing it to just 10 per cent of its former value.
"It is a good, solid company, a flagship Irish company. It will be back, but it may take time," one IFSC-based analyst commented.
Unlike CBT, Iona has a relatively broad investor base. Half the shares are owned by the company's executives and workers, while the remaining 50 per cent is split evenly between Europe and North America.
Since January, several executives and others associated with Iona have realised share options. On February 16th, Mr Barry Morris sold shares worth $2,450,000, while Mr Lindsey Kiang, Mr Annrai O'Toole, Mr Colin Newman and Mr Sean Baker have all sold shares worth more than $1 million.
Just last month, Business & Finance magazine named Iona as its Irish company of the year, citing its record revenues of $84 million (#79 million) in 1998, an increase of 72 per cent over the previous year.
