IONA's Overexposure

IONA (Nasdaq: IONA  ) develops software for service-oriented architecture (SOA), which helps companies use Web technologies to improve their information technology (IT) environments. It's a market undergoing consolidation, such as with Software AG's $546 million acquisition of webMethods and Oracle's (Nasdaq: ORCL  ) $6.6 billion bid for BEA Systems (Nasdaq: BEAS  ) .

Late last week, IONA reported its fiscal Q3 results. Revenue rose 19% to $24.2 million and license revenue was up 24.7% to $14.6 million. In fact, getting a boost from biggie customers like Citigroup (NYSE: C  ) and Nokia (NYSE: NOK  ) , the Artix product line increased its license revenue by 82%. IONA posted GAAP net income of $3.1 million, or $0.08 per share, and cash flows from operations were a healthy $6.6 million. The company has about $58.8 million in the bank.

To rev up growth, IONA is pushing hard on alliances. The company is now a gold certified partner with Microsoft (Nasdaq: MSFT  ) , which should help it win more customers next year. IONA is also pursuing an open-source strategy, which means offering some of its software as a free download. As seen with companies like Sourcefire (Nasdaq: FIRE  ) , the strategy is far from easy.

Another big issue is that IONA gets about 25% of its revenue from the financial sector. On the conference call, management talked about "subprime" issues with some of its customers, saying there could be a slowdown. Keep in mind that IONA's Q4 guidance for revenue is a soft $20 million to $22 million. 

All in all, IONA has done a fairly good job in terms of cash flows, revenue growth, and product innovation. But as a small business, the company may be more susceptible to volatility in different sectors, such as financial services. In other words, the lackluster stock performance could continue for the rest of the year.

For more Foolishness:

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 538964, ~/Articles/ArticleHandler.aspx, 10/24/2016 4:31:19 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,223.03 77.32 0.43%
S&P 500 2,151.33 10.17 0.47%
NASD 5,309.83 52.43 1.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/24/2016 4:00 PM
C $49.58 Up +0.01 +0.02%
Citigroup CAPS Rating: ***
MSFT $61.00 Up +1.34 +2.25%
Microsoft CAPS Rating: ****
NOK $4.97 Up +0.05 +1.02%
Nokia CAPS Rating: **
ORCL $38.27 Up +0.34 +0.90%
Oracle CAPS Rating: ****