Iona Technologies Ltd, the Dublin resident, Orbix branded object middleware company, hit record levels of revenue in its third quarter, apparently surpassing even the company’s own internal estimates according to chief finance officer David James, But the newly listed Nasdaq stock, along with the shares of other up and coming middleware companies like Visigenic Corp and BEA Systems Inc, is experiencing growing pains. Third quarter net profits to September 28 were $1.9m, up from second quarter net profits of $1.7m and well ahead of third quarter 1996 losses of $980,000 while revenue grew 125% to $12.9m and earnings per share were one cent ahead of estimates at $0.10. The company has consolidated its 1996 leading market share of the object middleware market at 30% (per IDC statistics) and the board has said it is supremely confident that growth will continue into 1998. But the stock is still sitting at a 25% discount on its April IPO debut price, despite a $3 hike on today’s news. The problem is the enormous earnings multiple assigned to a company like Iona which is growing its revenues at over 100% per annum but has no long term trading history to stabilize it. The stock floated at $18, and rose to a 52 week high of $27 which at the time represented a forward earnings multiple of over 70 and at least 10 to 15 times projected revenues. The Irish company listed itself on the Nasdaq in order to raise the best valuation for its IPO, but the cost to the company will be a consequent volatility in its stock due to the lofty valuation. Analysts are still recommending the stock as a strong buy, which shouldn’t be surprising because if the stock was worth buying at $25 in July, it’s a gift at $16. The company is more than happy with the market’s current expectations for a profitable fourth quarter and even gave out news of a large deal signed with one of the big telecommunications companies just two days after the quarter end. But investor confidence in the object middleware market seems to have waned, and sentiment hasn’t been helped by a recent unfavourable market report from UK telecoms consultant Ovum Ltd. Iona declined to comment aggressively on the report, preferring instead to point out that the document named themselves, along with IBM Corp, as the probable lead players in the middleware field. Iona continues to encounter IBM in tender situations but the market is still fragmented according to chief executive officer Chris Horn, with the major competition coming from potential client company’s own in house IT departments. Meanwhile, Iona has increased its sales and marketing spend by 40% to try and raise awareness of its products and brand name, especially in the US which accounts for 72% of Iona’s business, with 19% coming from Europe and the remainder is in the Asia Pacific area, Iona’s fastest growing geographical segment. Summing up the quarter, finance officer James said, The product team is delivering on time, every time?ustomers are pleased and the numbers are great.