The Dublin company's software is used by game manufacturers to run networked gaming sessions on the internet which allow users of consoles such as Microsoft's Xbox and Sony's Playstation to play against other gamers online.

Demonware technology has been used in a host of best-selling games titles for both consoles including Call Of Duty (above), Splinter Cell: Double Agent and WWE Smackdown.

It is understood Demonware has been acquired by a major US-based games publisher and will announce details of the transaction in the coming weeks.

Contacted by the Sunday Tribune, Demonware chief executive Dylan Collins would neither confirm nor deny that a deal had been completed and said he had no comment to make.

Notes to the company's 2005 accounts, filed with the Companies Office in September, say that the directors, Collins and co-founder Sean Blanchfield, "entered into discussions with an American incorporated company with a view to a possible equity investment by that company". It is understood those discussions are now complete and have resulted in Demonware's sale to one of its former customers.

Industry sources said the Irish firm would have been attractive to a host of potential suitors including Activision, Ubisoft, Electronic Arts and Sega, all of which have used its technology in the past.

Collins and Blanchfield are the majority shareholders in Demonware and would be the main beneficiaries of the deal. Other backers include Enterprise Ireland, the Dublin seed capital fund, and a number of private investors.