##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 0-29154
 IONA Technologies PLC
 (Exact name of registrant as specified in its charter)
 Ireland(State or other jurisdiction of 
incorporation or organization)
    
    N/A(I.R.S. Employer
Identification No.)The IONA Building 
Shelbourne Road, Ballsbridge 
Dublin 4, Ireland(Address of principal executive offices)
    
    N/A(Zip Code)
 +353-1-637-2000
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
  Class
    
    Outstanding at April 30, 2008Ordinary Shares, par value 0.0025 per share
    
    36,804,418




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##### 



TABLE OF CONTENTS
 Part I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (Unaudited):(a) Condensed Consolidated Balance Sheets at March 31, 2008
and December 31, 2007
    
    
    1(b) Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 2008 and 2007
    
    
    2(c) Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2008 and 2007
    
    
    3(d) Notes to Condensed Consolidated Financial Statements
    
    
    4Item 2.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    16Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    29Item 4.
    
    Controls and Procedures
    
    
    29Part II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    30Item 1A.
    
    Risk Factors
    
    
    30Item 6.
    
    Exhibits
    
    
    31SIGNATURES
    
    
    32EX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32.1 SECTION 906 CERTIFICATION OF THE CEO & CFO




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Item 1. Financial Statements
 
 IONA Technologies PLC
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
 March 31,2008
    
    
    December 31,(Unaudited)
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    29,354
    
    
    $
    21,767Restricted cash
    
    
    200
    
    
    
    200Marketable securities
    
    
    8,514
    
    
    
    34,514Accounts receivable, net of allowance of $402 and $583, respectively
    
    
    13,029
    
    
    
    12,378Prepaid expenses
    
    
    2,735
    
    
    
    2,138Deferred tax asset  current
    
    
    888
    
    
    
    888Other assets  current
    
    
    169
    
    
    
    190Total current assets
    
    
    54,889
    
    
    
    72,075Property and equipment, net of accumulated depreciation of $18,239 and $17,865, respectively
    
    
    2,618
    
    
    
    2,644Goodwill and intangible assets
    
    
    9,949
    
    
    
    10,149Marketable securities, non-current
    
    
    17,197
    
    
    
    Deferred tax asset
    
    
    1,040
    
    
    
    1,040Other assets
    
    
    422
    
    
    
    388Total assets
    
    $
    86,115
    
    
    $
    86,296LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    786
    
    
    $
    1,470Accrued payroll and related expenses
    
    
    4,436
    
    
    
    4,946Deferred revenue
    
    
    20,469
    
    
    
    15,931Other accrued liabilities
    
    
    12,480
    
    
    
    10,498Total current liabilities
    
    
    38,171
    
    
    
    32,845Long-term deferred revenue
    
    
    1,268
    
    
    
    1,317Other non-current liabilities
    
    
    1,731
    
    
    
    2,583Shareholders equity:Ordinary shares, 0.0025 par value, 150,000,000 shares authorized;36,789,406 and 36,531,565, respectively,
shares issues and outstanding
    
    
    101
    
    
    
    101Additional paid-in capital
    
    
    509,796
    
    
    
    508,474Accumulated deficit
    
    
    (464,156
    )
    
    
    (459,032
    )Accumulated other comprehensive (loss) / income
    
    
    (796
    )
    
    
    8Total shareholders equity
    
    
    44,945
    
    
    
    49,551Total liabilities and shareholders equity
    
    $
    86,115
    
    
    $
    86,296
  1.




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IONA Technologies PLC
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except share and per share data)
 Three Months EndedMarch 31,2008
    
    
    2007Revenue:Product revenue
    
    $
    6,596
    
    
    $
    6,268Service revenue
    
    
    9,845
    
    
    
    9,314Total revenue
    
    
    16,441
    
    
    
    15,582Cost of revenue:Cost of product revenue
    
    
    187
    
    
    
    230Cost of service revenue
    
    
    3,835
    
    
    
    3,453Total cost of revenue
    
    
    4,022
    
    
    
    3,683Gross profit
    
    
    12,419
    
    
    
    11,899Operating expenses:Research and development
    
    
    4,921
    
    
    
    4,427Sales and marketing
    
    
    7,209
    
    
    
    7,851General and administrative
    
    
    4,009
    
    
    
    3,126Amortization of intangible assets
    
    
    52
    
    
    
    8Restructuring
    
    
    1,529
    
    
    
    Total operating expenses
    
    
    17,720
    
    
    
    15,412Loss from operations
    
    
    (5,301
    )
    
    
    (3,513
    )Interest income, net
    
    
    499
    
    
    
    575Net exchange gain
    
    
    69
    
    
    
    13Loss before provision / (benefit) for income taxes
    
    
    (4,733
    )
    
    
    (2,925
    )Provision / (benefit) for income taxes
    
    
    391
    
    
    
    (77
    )Net loss
    
    $
    (5,124
    )
    
    $
    (2,848
    )Basic and diluted net loss per
ordinary share and per ADS
    
    $
    (0.14
    )
    
    $
    (0.08
    )Shares used in computing
basic and diluted net loss per ordinary share
and per ADS
    
    
    36,643
    
    
    
    36,074
  2.




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IONA Technologies PLC
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
 Three Months EndedMarch 31,2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (5,124
    )
    
    $
    (2,848
    )Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:Depreciation and amortization
    
    
    380
    
    
    
    413Amortization
    
    
    199
    
    
    
    69Share-based compensation
    
    
    609
    
    
    
    1,353Realized gain on marketable securities
    
    
    (15
    )
    
    
    (175
    )Loss on disposal of assets
    
    
    5
    
    
    
    Recovery of bad debt expense
    
    
    (161
    )
    
    
    (184
    )Deferred income taxes
    
    
    
    
    
    
    (409
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (490
    )
    
    
    7,182Prepaid expenses
    
    
    (597
    )
    
    
    (1,198
    )Other assets
    
    
    (13
    )
    
    
    (25
    )Accounts payable
    
    
    (684
    )
    
    
    947Accrued payroll and related expenses
    
    
    (510
    )
    
    
    (3,156
    )Other liabilities
    
    
    1,130
    
    
    
    (602
    )Deferred revenue
    
    
    4,489
    
    
    
    7,370Net cash (used in) provided by operating activities
    
    
    (782
    )
    
    
    8,737CASH FLOWS FROM INVESTING ACTIVITIES:Business acquired in purchase transaction, net of cash acquired
    
    
    
    
    
    
    (7,286
    )Sales of marketable securities
    
    
    18,750
    
    
    
    3,200Purchases of marketable securities
    
    
    (10,735
    )
    
    
    (3,925
    )Purchases of property and equipment
    
    
    (359
    )
    
    
    (149
    )Net cash provided by (used in) investing activities
    
    
    7,656
    
    
    
    (8,160
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from exercise of stock options
    
    
    497
    
    
    
    610Proceeds from employee share purchase plan
    
    
    216
    
    
    
    309Net cash provided by financing activities
    
    
    713
    
    
    
    919NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    7,587
    
    
    
    1,496CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    21,767
    
    
    
    37,569CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    29,354
    
    
    $
    39,065
  3.




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IONA Technologies PLC
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 1. Basis of Presentation and New Accounting Standards
    Fair Value Measurements,
 The Fair Value
Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement No.
115,
 Business
Combinations
 4.




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Noncontrolling
Interests in Consolidated Financial Statements  an amendment of Accounting Research Bulletin
(ARB) No. 51
 Disclosures about
Derivative Instruments and Hedging Activitiesan amendment of FASB Statement No. 133
 2. Revenue Recognition
 Software
Revenue Recognition
   
    
    persuasive evidence of an arrangement exists;
    
    delivery has occurred;
    
    customer fee is fixed or determinable; and
    
    collection is probable.
  5.




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
    
    Support contracts are regularly sold on a stand-alone basis to customers that choose to
renew the support contract beyond the initial term. Support contract pricing is based on
established list pricing. Renewal purchases at consistent pricing provide the basis for
VSOE on the support contracts. Support revenue is recognized ratably over the contract
term.
    
    Consulting contracts are regularly sold on a stand-alone basis to customers requesting
these services. Consulting contract pricing is at a daily flat rate and customers purchase
an appropriate number of service days. The consulting services delivered on a stand-alone
basis at consistent pricing provide the basis for VSOE on the consulting contracts.
Consulting revenue is recognized as the services are performed.
      3. Share-Based Compensation Plans
 Accounting for Stock-Based Compensation,
 Three Months EndedMarch 31,2008
    
    
    2007Employee share options *
    
    $
    575
    
    
    $
    1,232Employee share purchases *
    
    
    34
    
    
    
    56Phantom share units *+
    
    
    
    
    
    
    65Total share-based compensation
    
    $
    609
    
    
    $
    1,353
 6.




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1999 Employee Share Purchase Plan
 
 Employee Share-Based Compensation Plans
   Available forPlan
    
    Authorized
    
    Outstanding
    
    Future Grants1997 Share Option Scheme
    
    
    12,900,000
    
    
    
    5,162,777
    
    
    
    2006 Share Incentive Plan
    
    
    4,000,000
    
    
    
    1,518,750
    
    
    
    3,945,924
    *1997 Director Share Option Scheme
    
    
    500,000
    
    
    
    351,000
    
    
    
    Genesis Development Corporation 1997 Stock Option Plan
    
    
    
    **
    
    
    228
    
    
    
    Netfish Technologies, Inc. 1999 Stock Option Plan
    
    
    
    **
    
    
    25,594
    
    
    
    17,400,000
    
    
    
    7,058,349
    
    
    
    3,945,924
 
 *
    
    Includes 1,533,986 shares, as of March 31, 2008, from the 1997 Share Option Scheme and 1997
Director Share Option Scheme that were forfeited, cancelled, held back upon exercise of an
option or settlement of an award to cover the exercise price or tax withholding, reacquired by
the Company prior to vesting, satisfied without the issuance of shares or otherwise terminated
(other than by exercise).**
    
    In connection with acquisitions of Genesis Development Corporation and Netfish Technologies,
Inc., or Netfish, all of the outstanding share options for these plans were converted into
options to purchase the Companys ordinary shares. 7.




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General Share-Based Awards Information
  WeightedNumber
    
    
    Averageof Awards
    
    
    Exercise PriceBalance outstanding at December 31, 2007
    
    
    7,999
    
    
    $
    4.84Granted
    
    
    218
    
    
    
    3.50Forfeitures
    
    
    (983
    )
    
    
    4.43Exercised
    
    
    (176
    )
    
    
    2.82Balance outstanding at March 31, 2008
    
    
    7,058
    
    
    $
    4.91
  Options Outstanding
    
    
    Options ExercisableWeighted Average
    
    
    Weighted
    
    
    
    
    
    
    
    
    
    
    Weighted Average
    
    
    WeightedRemaining
    
    
    Average
    
    
    Aggregate
    
    
    
    
    
    
    Remaining
    
    
    Average
    
    
    AggregateRange of
    
    Number of
    
    
    Contractual Life
    
    
    Exercise
    
    
    Intrinsic
    
    
    Number of
    
    
    Contractual Life
    
    
    Exercise
    
    
    IntrinsicExercise Prices
    
    Shares
    
    
    (Years)
    
    
    Price
    
    
    Value
    
    
    Shares
    
    
    (Years)
    
    
    Price
    
    
    Value$1.99  $3.50
    
    
    2,520
    
    

    6.1
    
    
    $
    2.78
    
    
    $
    2,762
    
    
    
    2,091
    
    
    5.8
    
    
    $
    2.71
    
    
    $
    2,457$3.51  $5.00
    
    
    1,724
    
    

    7.9
    
    
    
    4.13
    
    
    
    95
    
    
    
    785
    
    
    7.4
    
    
    
    4.25
    
    
    
    14$5.01  $6.50
    
    
    1,893
    
    
    7.8
    
    
    
    5.45
    
    
    
    
    
    
    
    787
    
    
    6.8
    
    
    
    5.34
    
    
    
    $6.51  $8.00
    
    
    756
    
    
    5.6
    
    
    
    7.34
    
    
    
    
    
    
    
    756
    
    
    5.6
    
    
    
    7.34
    
    
    
    $8.01  $74.50
    
    
    165
    
    
    2.3
    
    
    
    28.17
    
    
    
    
    
    
    
    165
    
    
    2.3
    
    
    
    28.17
    
    
    
    Total
    
    
    7,058
    
    
    6.9
    
    
    $
    4.91
    
    
    $
    2,857
    
    
    
    4,584
    
    
    6.1
    
    
    $
    5.10
    
    
    $
    2,471
  Valuation and Expense Information under SFAS 123R
  Three Months EndedMarch 31,2008
    
    2007Cost of service revenue
    
    $
    98
    
    
    $
    143Research and development
    
    
    185
    
    
    
    290Sales and marketing
    
    
    176
    
    
    
    454General and administrative
    
    
    150
    
    
    
    466
  8.




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Three Months EndedMarch 31,2008
    
    2007Risk-free interest rate
    
    
    2.1
    %
    
    
    4.5
    %Expected dividend yield
    
    
    
    
    
    
    Expected volatility
    
    
    56.3
    %
    
    
    67.8
    %Expected life (years)
    
    
    3.02
    
    
    
    3.90
    Three Months EndedMarch 31,2008
    
    2007Risk-free interest rate
    
    
    3.0
    %
    
    
    5.1
    %Expected dividend yield
    
    
    
    
    
    
    Expected volatility
    
    
    25.0
    %
    
    
    67.8
    %Expected life (years)
    
    
    0.5
    
    
    
    0.5
 4. Restricted Cash
  5. Fair Value Measurements
 Basis of Presentation & New Accounting Standards
 9.




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Fair Value Measurements at March 31, 2008Quoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    InputsTotal
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Cash and cash equivalents
    
    $
    29,554
    
    
    $
    27,210
    
    
    $
    2,344
    
    
    $
    Marketable securities
    
    
    25,711
    
    
    
    
    
    
    
    8,514
    
    
    
    17,197Total
    
    $
    55,265
    
    
    $
    27,210
    
    
    $
    10,858
    
    
    $
    17,197
   10.




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SignificantOther
    
    
    SignificantObservable
    
    
    UnobservableInputs
    
    
    Inputs(in thousands)
    
    (Level 2)
    
    
    (Level 3)Fair value January 1, 2008
    
    $
    20,000
    
    
    $
    Purchases
    
    
    3,250
    
    
    
    Sales
    
    
    (5,250
    )
    
    
    Transfers (out) in
    
    
    (18,000
    )
    
    
    18,000Unrealized losses1
    
    
    
    
    
    
    (803
    )Fair value March 31, 2008
    
    $
    
    
    
    $
    17,197
 
 1
    
    Unrealized gains and losses on available for sale securities
are recorded as a separate component of accumulated other
comprehensive loss in the shareholders equity section of the
condensed consolidated balance sheet.  6. Marketable Securities
 Accounting for Certain Investments in Debt and Equity Securities or SFAS No. 115
 11.




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As of March 31, 2008Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    MarketCost
    
    
    Gains
    
    
    Losses
    
    
    Value(U.S. dollars in thousands)Auction rate securities
    
    $
    18,000
    
    
    $
    
    
    
    $
    (803
    )
    
    $
    17,197Fixed income securities
    
    
    2,046
    
    
    
    
    
    
    
    (4
    )
    
    
    2,042Commercial paper
    
    
    6,462
    
    
    
    11
    
    
    
    
    
    
    
    6,472Total marketable securities
    
    $
    26,508
    
    
    $
    11
    
    
    $
    (807
    )
    
    $
    25,711
 As of December 31, 2007Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    MarketCost
    
    
    Gains
    
    
    Losses
    
    
    Value(U.S. dollars in thousands)Auction rate securities
    
    $
    20,000
    
    
    $
    
    
    
    $
    
    
    
    $
    20,000Fixed income securities
    
    
    8,000
    
    
    
    8
    
    
    
    
    
    
    
    8,008Commercial paper
    
    
    6,506
    
    
    
    
    
    
    
    
    
    
    
    6,506Total marketable securities
    
    $
    34,506
    
    
    $
    8
    
    
    $
    
    
    
    $
    34,514
 7. Accumulated Other Comprehensive Loss
 Reporting Comprehensive Income,
 Three Months EndedMarch 31,2008
    
    
    2007Net loss
    
    $
    (5,124
    )
    
    $
    (2,848
    )Other comprehensive loss:Unrealized holding (losses) gains arising
during period
    
    
    (781
    )
    
    
    175Less: reclassification adjustment for gains
realized in net income
    
    
    15
    
    
    
    175Net unrealized losses on investments
    
    
    (796
    )
    
    
    Total comprehensive loss
    
    $
    (5,920
    )
    
    $
    (2,848
    )
 8. Advanced Billings
  12.




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9. Goodwill and Intangible Assets
  March 31, 2008Gross
    
    
    
    
    
    
    NetAmortization
    
    
    Carrying
    
    
    Accumulated
    
    
    CarryingPeriod (Years)
    
    
    Amount
    
    
    Amortization
    
    
    AmountGoodwill
    
    
    
    
    
    $
    7,521
    
    
    $
    
    
    
    $
    7,521Intangible assetsTechnology
    
    4
    
    
    
    2,350
    
    
    
    (635
    )
    
    
    1,715Customer relationships
    
    5
    
    
    
    730
    
    
    
    (148
    )
    
    
    582Non-competition agreements
    
    3
    
    
    
    200
    
    
    
    (69
    )
    
    
    131Amortizable intangible assets
    
    
    
    
    
    
    3,280
    
    
    
    (852
    )
    
    
    2,428Total goodwill and intangible assets
    
    
    
    
    
    $
    10,801
    
    
    $
    (852
    )
    
    $
    9,949
  2008
    
    2009
    
    2010
    
    2011
    
    2012Amortization expense
    
    $
    600
    
    
    $
    800
    
    
    $
    747
    
    
    $
    244
    
    
    $
    37
 10. Restructurings
    SeveranceExcess
    
    
    and OtherFacilities
    
    
    Direct Costs
    
    
    Total(U.S. dollars in thousands)Balance at December 31, 2007
    
    $
    2,391
    
    
    $
    
    
    
    $
    2,3912008 charges
    
    
    
    
    
    
    1,529
    
    
    
    1,529Cash outlays in 2008
    
    
    
    
    
    
    (1,238
    )
    
    
    (1,238
    )Balance at March 31, 2008
    
    $
    2,391
    
    
    $
    291
    
    
    $
    2,682
  13.




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11. Net Loss Per Ordinary Share and ADS
  12. Income Taxes
   13. Segment Information
 Disclosures About Segments
of an Enterprise and Related Information,
 14.




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Three Months EndedMarch 31,2008
    
    
    2007Americas
    
    $
    9,878
    
    
    $
    8,470Europe, Middle East and Africa
    
    
    4,385
    
    
    
    4,603Asia-Pacific Rim
    
    
    2,178
    
    
    
    2,509Total
    
    $
    16,441
    
    
    $
    15,582
  14. Contingencies
  15. Guarantees
   15.




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I tem 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 The following Managements Discussion and Analysis of Financial Condition and Results of Operations
of IONA Technologies PLC, hereinafter referred to as we, us, our, IONA, or the Company,
should be read in conjunction with the accompanying condensed consolidated financial statements for
the periods specified and associated notes. Managements Discussion and Analysis of Financial
Condition and Results of Operations contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the
Securities Exchange Act of 1934, as amended, or Exchange Act, made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995 that relate to future events or
our future financial performance. In some cases, you can identify forward-looking statements by
terminology, such as may, will, should, could, expect, plan, anticipate, believe,
estimate, project, predict, intend, potential, or continue or the negative of such
terms or other comparable terminology, although not all forward-looking statements contain such
terms. In addition, these forward-looking statements include, but are not limited to, statements
regarding, among other things, our plans, objectives, expectations and intentions. These
forward-looking statements are neither promises nor guarantees but rather are subject to a number
of risks and uncertainties that could cause actual results to differ materially from those
described in the forward-looking statements, including risks and uncertainties relating to IONAs
cost management efforts; growth in market demand for service oriented architectures and integration
software; IONAs sales model; volume, timing and seasonal patterns of product sales; impact of
competitive products and pricing; development, launch and market acceptance of new and improved
products; undetected errors in software; the integration of any acquisitions; anticipated tax
rates; and general economic conditions, including their effect on the acquisition of new accounts
and the time required to close sales transactions. You should not rely on these forward-looking
statements, 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 we disavow and disclaim any obligation to do so. Further reference should be made to
our Annual Report on Form 10-K for the year ended December 31, 2007, as well as elsewhere in this
report.
 Overview
    
    
    Revenue growth provides an important guide to our overall business growth and the
success of our sales and marketing efforts;
    
    Gross margin is an indicator of our offering mix, competitive pricing pressures and the cost
of our operations;
    
    Growth in our Artix product revenue is an indicator of the success of our focused sales
efforts;
    
    Earnings per share is an indicator of our overall performance;
    
    Liquidity and cash flow are indicators of our management of our balance sheet and expenses;
and
    
    Growth in our FUSE open source services revenue is an indicator of market acceptance of our
introductory offerings.
 16.




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Critical Accounting Policies and Estimates
  
    
    Revenue Recognition;
    
    Allowances for Doubtful Accounts;
    
    Share-Based Compensation;
    
    Accounting for Income Taxes;
    
    Goodwill and Intangible Assets;
    
    Marketable Securities;
    
    Restructuring; and
    
    Foreign Currency.
 Notes to the
Consolidated Financial Statements
 Revenue Recognition
 Software Revenue Recognition
   
    
    we enter into a legally binding arrangement with a customer for the license of software;
    
    delivery has occurred;
    
    the license fee is fixed or determinable; and
    
    collection is probable.
  17.




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
    
    Support contracts are regularly sold on a stand-alone basis to customers that choose to renew
the support contract beyond the initial term. Support contract pricing is based on established
list pricing. The renewal purchases at consistent pricing provide the basis for VSOE on the
support contracts. Support revenue is recognized ratably over the contract support term.
 
    
    Consulting contracts are regularly sold on a stand-alone basis to customers requesting these
services. Consulting contract pricing is at a flat daily rate and customers purchase an
appropriate number of service days. The consulting services delivered on a stand-alone basis
at consistent pricing provide the basis for VSOE on the consulting contracts. Consulting
revenue is recognized as the services are performed.
      Allowances for Doubtful Accounts
  18.




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Share-Based Compensation
 Share-Based Payment,
    Accounting for Income Taxes
    19.




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Goodwill and Intangible Assets
 Goodwill and Other
Intangible Assets
 20.




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Marketable Securities
 Accounting for Certain Investments in Debt and
Equity Securities, and SAB Topic 5M, Accounting for Noncurrent Marketable Equity Securities
 Fair Value Measurements
 Restructurings
   21.




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Foreign Currency
  22.




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Results of Operations
  Three Months EndedMarch 31,2008
    
    2007Revenue:Product revenue
    
    
    40.1
    %
    
    
    40.2
    %Service revenue
    
    
    59.9
    
    
    
    59.8Total revenue
    
    
    100.0
    
    
    
    100.0Cost of revenue:Cost of product revenue
    
    
    1.1
    
    
    
    1.2Cost of service revenue
    
    
    23.3
    
    
    
    22.1Total cost of revenue
    
    
    24.4
    
    
    
    23.3Gross margin
    
    
    75.6
    
    
    
    76.7Operating expenses:Research and development
    
    
    29.9
    
    
    
    28.4Sales and marketing
    
    
    43.9
    
    
    
    50.4General and administrative
    
    
    24.4
    
    
    
    20.1Amortization of intangible assets
    
    
    0.3
    
    
    
    0.3Restructuring
    
    
    9.3
    
    
    
    0.0Total operating expenses
    
    
    107.8
    
    
    
    99.2Loss from operations
    
    
    (32.2
    )
    
    
    (22.5
    )Interest income, net
    
    
    3.0
    
    
    
    3.7Net exchange gain
    
    
    0.4
    
    
    
    0.0Loss before provision / (benefit) for income taxes
    
    
    (28.8
    )
    
    
    (18.8
    )Provision / (benefit) for income taxes
    
    
    2.4
    
    
    
    (0.5
    )Net loss
    
    
    (31.2
    )%
    
    
    (18.3
    )%Gross margin:Product
    
    
    97.2
    %
    
    
    96.3
    %Service
    
    
    61.0
    %
    
    
    62.9
    %
 Three months ended March 31, 2008, compared to three months ended March 31, 2007
 Total Revenue
  Three Months Ended March 31,($ in millions)
    
    2008
    
    

%
of Total
    
    
    2007
    
    

%
of Total
    
    
    % ChangeAmericas
    
    $
    9.9
    
    
    
    60.1
    %
    
    $
    8.5
    
    
    
    54.4
    %
    
    
    16.6
    %Europe, Middle East and Africa
    
    
    4.4
    
    
    
    26.7
    %
    
    
    4.6
    
    
    
    29.5
    %
    
    
    (4.7
    )%Asia-Pacific Rim
    
    
    2.1
    
    
    
    13.2
    %
    
    
    2.5
    
    
    
    16.1
    %
    
    
    (13.2
    )%Total revenue
    
    $
    16.4
    
    
    
    
    
    
    $
    15.6
    
    
    
    
    
    
    
    5.5
    %
 23.




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Three Months Ended March 31,($ in millions)
    
    2008
    
    
    2007
    
    
    % ChangeProduct revenue
    
    $
    6.6
    
    
    $
    6.3
    
    
    
    5.2
    %Service revenue
    
    
    9.8
    
    
    
    9.3
    
    
    
    5.7
    %Total revenue
    
    $
    16.4
    
    
    $
    15.6
    
    
    
    5.5
    %
   Cost of Product Revenue
 Three Months Ended March 31,($ in millions)
    
    2008
    
    2007
    
    % ChangeCost of product revenue
    
    $
    0.2
    
    
    $
    0.2
    
    
    
    (18.7
    )%Gross margin
    
    
    97.2
    %
    
    
    96.3
    %
  Cost of Service Revenue
 Three Months Ended March 31,($ in millions)
    
    2008
    
    2007
    
    % ChangeCost of service revenue
    
    $
    3.8
    
    
    $
    3.5
    
    
    
    11.1
    %Gross margin
    
    
    61.0
    %
    
    
    62.9
    %
  24.




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Research and Development
 Three Months Ended March 31,($ in millions)
    
    2008
    
    2007
    
    % ChangeResearch and development
    
    $
    4.9
    
    
    $
    4.4
    
    
    
    11.2
    %Percentage of revenue
    
    
    29.9
    %
    
    
    28.4
    %
  Sales and Marketing
 Three Months Ended March 31,($ in millions)
    
    2008
    
    2007
    
    % ChangeSales and marketing
    
    $
    7.2
    
    
    $
    7.9
    
    
    
    (8.2
    )%Percentage of revenue
    
    
    43.9
    %
    
    
    50.4
    %
  General and Administrative
 Three Months Ended March 31,($ in millions)
    
    2008
    
    2007
    
    % ChangeGeneral and administrative
    
    $
    4.0
    
    
    $
    3.1
    
    
    
    28.2
    %Percentage of revenue
    
    
    24.4
    %
    
    
    20.1
    %
  25.




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##### Table of Contents



Amortization of Intangible Assets
  Restructurings
  Interest Income, Net
  Net Exchange Gain
  Provision / (Benefit) for Income Taxes
  26.




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Liquidity and Capital Resources
   Three Months EndedMarch 31,2008
    
    
    2007(U.S. dollars, in thousands)Cash and cash equivalents, beginning of period
    
    $
    21,767
    
    
    $
    37,569Net cash (used in) provided by operating activities
    
    
    (782
    )
    
    
    8,737Net cash provided by (used in) investing activities
    
    
    7,656
    
    
    
    (8,160
    )Net cash provided by financing activities
    
    
    713
    
    
    
    919Cash and cash equivalents, end of period
    
    $
    29,354
    
    
    $
    39,065
      27.




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Payment due by period (U.S. dollars in thousands)Less than
    
    1-3
    
    3-5
    
    More thanContractual Obligations
    
    Total
    
    1 year
    
    years
    
    years
    
    5 yearsOperating Lease Obligations
    
    $
    23,690
    
    
    $
    5,834
    
    
    $
    9,244
    
    
    $
    7,437
    
    
    $
    1,175
    Exposure to Currency Fluctuations
  28.




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Quantitative and Qualitative Disclosures About Market Risk
 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
      
 Item 4. Controls and Procedures
 (a) Disclosure Controls and Procedures.
  29.




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##### Table of Contents



(b) Changes in Internal Controls Over Financial Reporting.
  
  
 Item 1. LEGAL PROCEEDINGS
  
 Item 1A. RISK FACTORS
  In addition to the risks described in our Annual Report on Form 10-K for the year ended December
31, 2007, an unsolicited preliminary expression of interest in the acquisition of IONA and the
public nature of the resulting review of strategic alternatives by the Board of Directors has
created a distraction for our management and uncertainty that may adversely affect our business.
  30.




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Item 6. Exhibits
  Exhibit No.
    
    Description of Exhibit10.1
    
    Form of Incentive Share Option Agreement (1)10.2
    
    Form of Non-Qualified Option Agreement (1)10.3
    
    Form of Phantom Share Unit Agreement (2)10.4
    
    First Amendment to Non-Executive Directors Change in Control Plan, dated
November 29, 2007 (2)10.5
    
    Form of First Amendment to Change of Control Agreement by and among IONA
Technologies, Inc., IONA Technologies PLC and each of the executive
officers of IONA Technologies PLC (2)10.6
    
    Senior Management Team Bonus Plan (3)31.1*
    
    Certification of Principal Executive Officer required by Rule 13a-14(a)
or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2*
    
    Certification of Principal Financial Officer required by Rule 13a-14(a)
or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1**
    
    Certification of Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
 
 
    
    This exhibit is a management contract or compensatory plan or arrangement.*
    
    Filed herewith.**
    
    Furnished herewith.(1)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on February 26,
2008.(2)
    
    Incorporated by Incorporated by reference to the Companys Annual Report on Form 10-K for the
year ended December 31, 2007 (File No. 0-29154).(3)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on February 21,
2008. 31.




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SIGNATURES
  IONA Technologies PLCDate: May 12, 2008By:
    /s/ Peter M. ZottoPeter M. Zotto, Chief Executive Officer(Principal Executive Officer)By:
    /s/ Christopher M. MirabileChristopher M. Mirabile, Chief Financial Officer(Principal Financial Officer) 32.