IONA Reports Q3 2005 Results; Artix Revenue Growth Leads to Third Quarter Profitability

1 January 1970

IONA(R) Technologies (NASDAQ: IONA), a world leader in high-performance integration solutions for mission-critical IT environments, today announced third quarter revenues of $17.4 million. On a U.S. generally accepted accounting principles (GAAP) basis, IONA reported net income of $0.01 per share.

"IONA performed well in the third quarter. We achieved continued sequential growth in our Artix business and generated solid performance from our CORBA business," said Peter Zotto, CEO, IONA Technologies. "With our CORBA revenue steady at last year's third quarter level, and growth in Artix, IONA achieved profitability in the quarter."

"I am also pleased with the continued progress we are making on our strategic initiatives, specifically accelerating our partner program with key new additions, expanding our open source program beyond the ObjectWeb Consortium to include membership in the Eclipse Foundation, and sustaining our industry stewardship of CORBA. The success of our commercial software offerings and expanding partner ecosystem, combined with our efforts in the open source community, support IONA's goal of delivering value to customers and providing sustainable performance for our shareholders."

"Additionally, I am pleased to announce that Robert McBride has joined IONA on an interim basis as our chief financial officer to lead the finance organization and help us drive our strategic initiatives. Bob was formerly chief financial officer at Ascential Software prior to its acquisition by IBM. He is a recognized industry executive and we welcome his leadership and insights."

Q3 2005 Highlights

-- Achieved year over year total revenue growth of 6%; 29% growth in license revenue

-- Generated year over year Artix growth of 62%; completed 10 Artix transactions; 5 of them first time Artix purchasers

-- Ended the quarter with $50 million cash and marketable securities

-- Launched www.orbzone.org, an online portal that creates an interactive online resource for the global CORBA user community (press release dated September 20, 2005)

-- Entered into strategic relationship with Satyam, a leading global consulting and IT services company (press release dated October 10, 2005)

-- Entered into a joint technology, marketing and sales agreement with MetaSecure, an IT consulting and secure integration development company (press release dated August 29, 2005)

-- Extended IONA's open source program by joining the Eclipse Foundation as a Strategic Developer and Board member (press release dated September 12, 2005)

-- Achieved the first development milestone for the open source ESB project Celtix that we launched earlier this year with the ObjectWeb consortium (press release dated September 27, 2005)

-- Extended the Celtix ecosystem through participation in the Synapse and ServiceMix open source projects (press releases dated August 22, 2005 and September 27, 2005)

Looking Forward

IONA expects total revenues for Q4 2005 to be in the range of $17 - $18 million. The company expects total expenses for the fourth quarter 2005, including cost of revenue, operating expenses and a first time expense for accrued vacation, to be in the range of $18 - $19 million.

Conference Call

IONA will host a conference call today at 10:00 a.m. Eastern Time to discuss the company's third quarter results. Investors and other interested parties may dial into the call using the toll free number (800) 857-4151 or (210) 234-0013 internationally. The conference call will also be available via webcast at www.iona.com/investors. Following the conclusion of the call, a rebroadcast will be available at IONA's Web site or by calling (866) 436-9387 or (203) 369-1036 internationally until October 27, 2005.

About IONA

For more than a decade, IONA(R) Technologies (NASDAQ: IONA) has been a world leader in delivering high-performance integration solutions for Global 2000 IT environments. IONA pioneered standards-based integration with its CORBA-based Orbix(R) products. Artix(TM), IONA's extensible Enterprise Service Bus, enables existing enterprise systems to be integrated with an organization's common infrastructure components. IONA's sponsorship of the ObjectWeb Celtix open source ESB is a natural extension of the company's history of solving integration problems by leveraging open standards and distributed architectures.

IONA is headquartered in Dublin, Ireland, with U.S. headquarters in Waltham, Massachusetts and offices worldwide. For additional information about IONA, visit our Web site at http://www.iona.com.

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including statements concerning expected results of operations, expectations regarding future transactions, plans and objectives of management, expectations regarding future financial performance, market positioning, growth, demand and opportunity. The forward-looking statements made are neither promises nor guarantees and are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated or indicated, including timing and seasonal patterns of product sales; growth in market demand for Web services and integration; IONA's sales model; impact of competitive products and pricing; development, launch and market acceptance of new and improved products; IONA's cost reduction efforts and cash balance; the integration of any future acquisitions; undetected errors in software; and general economic conditions, including their effect on the acquisition of new accounts and the time required to close sales transactions. For a more detailed discussion of the risks and uncertainties, please refer to our most recent Annual Report on Form 20-F and other periodic reports and registration statements filed with the Securities and Exchange Commission. You should not place undue reliance on any such forward-looking statements in this press release, which are current only as of the date when made. You should not expect that these forward-looking statements will be updated or supplemented as a result of changing circumstances or otherwise, and IONA disavows and disclaims any obligation to do so.

IONA, IONA Technologies, the IONA logo, Orbix, High Performance Integration, Artix, Mobile Orchestrator and Making Software Work Together are trademarks or registered trademarks of IONA Technologies PLC and/or its subsidiaries. CORBA is a trademark or registered trademark of the Object Management Group, Inc. in the United States and other countries. All other trademarks that may appear herein are the property of their respective owners.

IONA Technologies PLC
Condensed Consolidated Statements of Operations
(U.S. dollars in thousands, except per share data)

Three Months Ended Nine Months Ended
September September September September
30, 2005 30, 2004 30, 2005 30, 2004
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
-------------------------------------------
Revenue:
Product revenue $ 9,397 $ 7,291 $22,749 $20,309
Service revenue 8,030 9,191 24,964 28,206
---------- ---------- ---------- ----------
Total revenue 17,427 16,482 47,713 48,515

Cost of revenue:
Cost of product revenue 44 58 128 229
Cost of service revenue 2,843 2,853 8,667 9,010
---------- ---------- ---------- ----------
Total cost of revenue 2,887 2,911 8,795 9,239

---------- ---------- ---------- ----------
Gross profit 14,540 13,571 38,918 39,276

Operating expense:
Research and development 3,842 4,052 11,825 12,879
Sales and marketing 7,797 6,828 22,330 20,787
General and
administrative 2,275 2,124 6,501 6,410
Amortization of other
assets 39 146 220 432
Restructuring 0 0 (97) 0
---------- ---------- ---------- ----------
Total operating
expenses 13,953 13,150 40,779 40,508

Income (loss) from
operations 587 421 (1,861) (1,232)

Interest income, net 174 149 565 190
Net exchange gain (loss) (130) (211) 41 (16)
---------- ---------- ---------- ----------

Income (loss) before
provision for income
taxes 631 359 (1,255) (1,058)
Provision for income taxes 193 150 548 400
---------- ---------- ---------- ----------

Net income (loss) $ 438 $ 209 ($1,803) ($1,458)
========== ========== ========== ==========

Net income (loss) per
ordinary share and per ADS
Basic $ 0.01 $ 0.01 ($0.05) ($0.04)
Diluted $ 0.01 $ 0.01 ($0.05) ($0.04)
Pro forma basic $ 0.01 $ 0.01 ($0.05) ($0.03)
Pro forma diluted $ 0.01 $ 0.01 ($0.05) ($0.03)

Shares used in computing
net income (loss)
per ordinary share and per
ADS (in thousands)
Basic 35,226 34,673 35,075 34,505
Diluted 35,740 35,770 35,075 34,505
Pro forma basic 35,226 34,673 35,075 34,505
Pro forma diluted 35,740 35,770 35,075 34,505

IONA Technologies PLC
Unaudited Pro Forma Statements of Operations
Impact of Pro Forma Adjustments on Pro Forma Net Income (Loss)
(U.S. dollars in thousands, except per share data)

Three Months Ended
September 30, 2005
----------------------------------

(Unaudited) (Unaudited)(Unaudited)
As Reported Adjusts (1) Pro forma
----------------------------------

Revenue $ 17,427 $ 0 $17,427

Cost of revenue 2,887 0 2,887

Gross profit 14,540 0 14,540

Research and development 3,842 0 3,842
Sales and marketing 7,797 0 7,797
General and administrative 2,275 0 2,275
Amortization of other assets 39 (39) 0
----------- ---------- ----------
Total operating expenses 13,953 (39) 13,914

Income from operations 587 39 626

Income before provision for income
taxes 631 39 670

Provision for income taxes 193 0 193

Net income $ 438 $ 39 $ 477

Net income per ordinary share and
per ADS
Basic $ 0.01 $ 0.00 $ 0.01
Diluted $ 0.01 $ 0.00 $ 0.01

Shares used in computing net income
per ordinary share and per ADS
(in thousands)
Basic 35,226 35,226
Diluted 35,740 35,740

Three Months Ended
September 30, 2004
----------------------------------

(Unaudited) (Unaudited)(Unaudited)
As Reported Adjusts (2) Pro forma
----------------------------------

Revenue $ 16,482 $ 0 $16,482

Cost of revenue 2,911 0 2,911

Gross profit 13,571 0 13,571

Research and development 4,052 (5) 4,047
Sales and marketing 6,828 0 6,828
General and administrative 2,124 0 2,124
Amortization of other assets 146 (146) 0
----------- ---------- ----------
Total operating expenses 13,150 (151) 12,999

Income from operations 421 151 572

Income before provision for income
taxes 359 151 510

Provision for income taxes 150 0 150

Net income $ 209 $ 151 $ 360

Net income per ordinary share and
per ADS
Basic $ 0.01 $ 0.00 $ 0.01
Diluted $ 0.01 $ 0.00 $ 0.01

Shares used in computing net income
per ordinary share and per ADS
(in thousands)
Basic 34,673 34,673
Diluted 35,770 35,770

Nine Months Ended
September 30, 2005
---------------------------------

(Unaudited) (Unaudited)(Unaudited)
As Reported Adjusts (1) Pro forma
----------------------------------

Revenue $47,713 $ 0 $47,713

Cost of revenue 8,795 0 8,795

Gross profit 38,918 0 38,918

Research and development 11,825 0 11,825
Sales and marketing 22,330 0 22,330
General and administrative 6,501 0 6,501
Amortization of other assets 220 (220) 0
Restructuring (97) 97 0
---------- ---------- ----------
Total operating expenses 40,779 (123) 40,656

Loss from operations (1,861) 123 (1,738)

Loss before provision for income
taxes (1,255) 123 (1,132)

Provision for income taxes 548 0 548

Net loss ($1,803) $ 123 ($1,680)

Net loss per ordinary share and per ADS
Basic ($0.05) $ 0.00 ($0.05)
Diluted ($0.05) $ 0.00 ($0.05)

Shares used in computing net loss per
ordinary share and per ADS
(in thousands)
Basic 35,075 35,075
Diluted 35,075 35,075

Nine Months Ended
September 30, 2004
---------------------------------

(Unaudited)(Unaudited)(Unaudited)
As Reported Adjusts (2) Pro forma
---------------------------------

Revenue $48,515 $ 0 $48,515

Cost of revenue 9,239 0 9,239

Gross profit 39,276 0 39,276

Research and development 12,879 (39) 12,840
Sales and marketing 20,787 0 20,787
General and administrative 6,410 0 6,410
Amortization of other assets 432 (432) 0
Restructuring 0 0 0
---------- ---------- ----------
Total operating expenses 40,508 (471) 40,037

Loss from operations (1,232) 471 (761)

Loss before provision for income
taxes (1,058) 471 (587)

Provision for income taxes 400 0 400

Net loss ($1,458) $ 471 ($987)

Net loss per ordinary share and per ADS
Basic ($0.04) $ 0.01 ($0.03)
Diluted ($0.04) $ 0.01 ($0.03)

Shares used in computing net loss per
ordinary share and per ADS (in
thousands)
Basic 34,505 34,505
Diluted 34,505 34,505

(1) Adjusted to exclude amortization of other assets of $39,000 for
the three months ended September 30, 2005 and $220,000 for the
nine months ended September 30, 2005 and restructuring of
($97,000) for the nine months ended September 30, 2005.

(2) Adjusted to exclude: stock-based compensation of $5,000 for the
three months ended September 30, 2004 and $39,000 for the nine
months ended September 30, 2004 and amortization of other assets
of $146,000 for the three months ended September 30, 2004 and
$432,000 for the nine months ended September 30, 2004.

IONA Technologies PLC
Condensed Consolidated Balance Sheets
(U.S. dollars in thousands, except share and per share data)

Sept. 30, Dec. 31,
2005 2004 (1)
(Unaudited)
-----------------------
ASSETS
Current assets:
Cash and cash equivalents $ 14,583 $ 25,096
Restricted cash 495 3,495
Marketable securities 35,383 31,324
Accounts receivable, net of allowance for
doubtful accounts of $1,102 at
September 30, 2005
and $1,073 at December 31, 2004 7,949 12,912
Prepaid expenses 1,152 1,603
Other assets 297 1,104
-----------------------
Total current assets 59,859 75,534

Property and equipment, net 4,122 4,851
Other non-current assets, net 214 441
-----------------------
Total assets $ 64,195 $ 80,826
=======================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,884 $ 2,602
Accrued payroll and related expenses 3,228 5,534
Other accrued liabilities 8,860 14,134
Deferred revenue 14,722 21,179
-----------------------
Total current liabilities 28,694 43,449

Other non-current liabilities 1,344 2,415

Shareholders' equity:
Ordinary shares, EUR 0.0025 par
value, 150,000,000
shares authorized; 35,300,208 and
34,803,601 shares
issued and outstanding at September
30, 2005 and
December 31, 2004, respectively 98 96
Additional paid-in capital 495,833 494,837
Accumulated deficit (461,774) (459,971)
-----------------------
Total shareholders' equity 34,157 34,962

-----------------------
Total liabilities and shareholders'
equity $ 64,195 $ 80,826
=======================

(1) The December balance sheet information has been derived from the
December 31, 2004 audited consolidated financial statements.