Companies like Oracle (Nasdaq: ORCL ) and IBM (NYSE: IBM ) are bulking up with acquisitions, making life ever tougher for small enterprise-software players. But despite the increasingly hostile climate, IONA (Nasdaq: IONA ) has gained traction in its business. Better yet, its stock also looks like a bargain.
IONA develops software for service-oriented architecture implementations, using Web-based approaches to meld different information technology environments. It's a crowded market, filled with rivals such as BEA Systems (Nasdaq: BEAS ) , webMethods (Nasdaq: WEBM ) , and Progress Software (Nasdaq: PRGS ) .
IONA's fiscal first-quarter revenues fell 8% year over year, to $15.5 million, while license revenues plunged 23% to $6.2 million. The drop largely stems from IONA's decision to defer recognition of $1.6 million in revenues for a complex software implementation, and from the effects of several deals that apparently fell through during the quarter.
In light of all this, it's no surprise to see the company post a net loss of $2.8 million, or $0.08 per share. Still, maintaining discipline on costs let IONA crank out $8.7 million in cash flow from operations.
IONA has ramped up its dealmaking as well. Its acquisition of C24 will add stronger data capabilities and a handful of major customers to the company's ranks. And in purchasing LogicBlaze, IONA gained a strong development team and a greater opportunity to expand into the growing open-source market.
Trading at 1.7 times revenues, IONA's shares look fairly cheap. After all, Software AG recently spent $546 million to purchase webMethods, at two times revenues. With IONA's management expecting revenues of $20 million to $22 million in Q2, there could be additional room for the stock to rise.
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