Commtouch Climbs on News of Microsoft's 4.7% Stake

The software giant exercises a warrant to buy $20 million worth of stock at a steep discount.
Author:
Publish date:

Updated from 8:31 a.m. EST

Shares in

Commtouch Software

(CTCH)

climbed 9 5/16, or 25%, to 46 13/16 in Thursday morning trading on news that

Microsoft

(MSFT) - Get Report

paid $20 million for a 4.7% stake in the email provider. (Commtouch closed up 11 5/8, or 31%, to 49 1/8.)

Redmond, Wash.-based Microsoft exercised a warrant to buy 707,964 Commtouch ordinary shares at 28 1/4, a roughly 25% discount to Commtouch's Wednesday closing price of 37 1/2. Commtouch, which is trading near its 52-week high of 39 5/8, had a market cap of $477 million at Wednesday's close. (Microsoft settled down 3/8, or .32%, to 117 5/8.)

"This investment strongly reinforces Microsoft's recognition of Commtouch as both a key technical partner and a leading provider of integrated email outsourcing services," Gideon Mantel, Commtouch's CEO, said in a statement.

In October, Microsoft agreed to use Santa Clara, Calif.-based Commtouch Software to handle some of its

Microsoft Network

online services, including its Web-based email and instant messaging. That deal provided for the warrant agreement.

The companies said that over the last several years, Commtouch has built a scalable infrastructure based on a variety of Microsoft platforms and technologies. The relationship with Microsoft underscores the commitment by Commtouch to Microsoft's leading-edge messaging technologies and Commtouch's continued leadership in the email outsourcing market.