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January 26, 1998

IONA REPORTS SOLID Q4 REVENUE, DISAPPOINTING EARNINGS

By CBR Staff Writer

Iona Technologies Ltd turned in fourth-quarter numbers that disappointed Wall Street even before a $2.9m charge that led to a net loss. The Dublin-based object middleware company posted pro forma net income of $2.2m, or $0.11 per share, when the consensus estimate was $0.14. After the charge, stemming from its acquisition of Transarc source code from IBM Corp, net loss was $270,000, compared to net income of $793,000, or $0.05 per share, a year ago. Revenue soared 117.6% to $16.1m, with product revenues at $10.8m and service revenues at $5.3m. In addition to the solid revenue growth, gross margins increased about 3.1% to 74% for the quarter. Service margins which that seven points to 33% and increased spending took their toll on the bottom line, however. Total operating expenses, net of the $2.9m charge, rose to $10.4m from $4.3m last year, with sales and marketing expenses up to $5.2m from $1.4m. The company says it will continue to build it sales organization, but growth should slow somewhat in the current quarter. The current workforce is 428, up from 321 a year ago. Geographically, sales in the Americas (70% of the total) rose 22% for the quarter, while European sales (24% overall) surged 55%. Asia-Pacific, which accounted for 6% of total revenues, saw a 10% decline. Iona’s partners brought in about 16% of total sales. The size of an average deal rose between 15%-20% for the quarter, and is now in the $10,000 to $15,000 range. For fiscal 1997, net income was $4.8m on revenue up 129.3% at $48.6m, against net income of $1.5m last year. Earnings per share for the year rose 150% to $0.25. Looking ahead, the company’s largest deal yet, at $3.1m, was recently inked and should see the lion’s share of it recognized in the first quarter. Revenues from the recently-launched OrbixOTM product – a small amount of which was recognized in the fourth- quarter – should also contribute to the top line this quarter.

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