Despite a number of successful, long-awaited stock-market flotations by Irish technology companies this year, the final tally still falls short of popular predictions.
The chequered experiences of Irish firms like CBT (now SmartForce), Iona Technologies and Icon have acted as a reality check for companies which may have been prematurely seduced by the attractions of Nasdaq.
"Nasdaq can be a very unforgiving place to bring your company, and to float in Europe you need to be more established to gain acceptance.
"Baltimore was a good example of this, where it needed to take over Zergo to create a critical mass of customers," says Mr Roger Hatfield, principle consultant with Technology Investment Underwriting (TIU), a strategic consultancy for the technology industry.
Datalex, a Dublin-based company specialising in aviation software, was heavily tipped to seek a listing this year. Instead, it sought to raise $15 million (€14.8 million) privately, and completed three company acquisitions during 1999. Heads of agreement have been signed on a further $14 million acquisition, likely to take place before the end of the year.
"Nasdaq is a meaningless move unless you're raising more than $70 million. We are only at a size now where we can consider it, and next time we go looking for funds it will probably be public money," says Mr Neil Wilson, Datalex chief executive.
Another reason companies are shying off the public route is the ready availability of private capital. Cash-laden institutional investors are clamouring for equity stakes in potentially high growth companies.
"You can now nearly raise as much capital, and get as good a valuation privately with the international venture capital community. And it can be done without any of the costs or publicity associated with a flotation," Mr Hatfield says.
International Financial Services (IFS), a Dublin-based financial software company this year decided against seeking a listing on the Dublin and London developing companies and alternative investment markets (DCM/ AIM).
It lacked the scale to make the considerably larger leap onto the Nasdaq, or even Germany's Neuermarkt. Instead, it sought to raise capital privately, keeping strategic partners that would be valuable to the business in mind. That process resulted in a $1.5 million investment from Intel and Deutsche Bank.
"Good strategic partners are better for us than a partial listing. In three years time we're looking at a proper flotation. Our backers would be disappointed if we don't float in excess of $300 million or $400 million," says Mr Ken Coldrick, IFS managing director. According to one industry observer IFS is likely in the longer term to go for a straight trade sale, particularly with the Intel investment already on board, it may become an attractive acquisition for the chip-making giant.
Mr Hatfield adds there are more new sources of funding available, outside the traditional institutional investors. Large corporates and telecommunications companies are constantly looking to make strategic investments into the tech sector.
This was best evidenced by Eircom's surprise investment of £8.2 million (€10.41 million) in Flexicom earlier this month. Representing a 30 per cent stake in the e-commerce software development group, it now seems unlikely Flexicom will go down the IPO route for a couple of years at least.
Sources familiar with Flexicom say it needed to increase its valuation before it could consider making the leap to a public flotation.
According to Ms Orla Brannigan, Flexicom senior vice-president of marketing: "Eircom wanted to move up the e-commerce value chain, and it provided a ready-made distribution channel for Flexicom. There's also the advantage of complementary technologies and resource sharing."
Lake Communications, the telecommunications and datacommunications company, had a quiet year where more activity might have been expected. Product problems late last year ate into this year's performance, but a healthy enough balance sheet meant it managed to hold onto its equity for another while.
In the fast growing storage market, Cork-based Raidtec and Dublin-based Eurologic, have both long been fancied to go for a listing.
According to Mr Ray O'Driscoll, chief financial officer with Eurologic, the company currently has sufficient funds following a $10 million fundraiser last year.
"An IPO is still very much an option, which is likely to be reviewed in the next 18 to 24 months," he says.
Despite annual growth of 100 per cent, Eurologic may face problems in the open market as it currently depends heavily on a very small customer base, including Network Appliances.
According to one industry observer, Eurologic bears all the characteristics of a company more likely to go for a trade sale by a bigger player in the same space. There could also be potential for a merger between Eurologic and Raidtec.
If there are any lessons to be learned from the fortunes of those that went to the market this year, the biggest is consolidation. A strategy of merger and acquisition appears to be the name of the game for those with the stomach to play with the high rollers.
