Riverdeep's deal with IBM, through which the computer giant took a 14 per cent stake in the developing Irish educational software firm, did little for Riverdeep shares.

Even though IBM has agreed to lock in for two years, the market only added 38 cents to the shares, bringing them to $19.12 (€21.23) on the Nasdaq. While the Edmark acquisition which brought IBM into Riverdeep will boost Riverdeep's revenues, the acquisition, with annual revenues of $20 million, is only operating at breakeven. And Riverdeep has to meet the considerable challenge of converting all of Edmark's 57 CD-Rom software titles to Internet format and to change its business model from a license-based operation to a subscription-based one.

With the market less than fully convinced about the deal, quarterly results released within days of the announcement did not help the share price either. Losses up 322 per cent to $7.1 million for the year to end June were in line with expectations.

But the company is now trading at around nine times projected 2001 sales compared to its peers on three to four times sales. With analysts now questioning the extent of the premium on the stock and whether the company can meet its target of an average revenue per subscriber target of $20, Riverdeep's shares are unlikely to show much progress in the short term.