Investment bank

CIBC Oppenheimer

has not only downgraded

CommTouch Software

(Nasdaq:CTCH) from Strong Buy to Hold. It won't even resumke coverage of the company until the fog surrounding its future lifts.

The downgrade follows CommTouch's earnings warning regarding the fourth quarter of 2000. The bank says CommTouch will have to strive to regain investor faith.

Oppenheimer's analysts believe that the company's fourth-quarter sales will be in a range of $5.5 million to $6 million, half the forecast $11.7 million. Moreover, the analysts slashed their 2001 sales forecast from $72 million to $45 million.

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CommTouch's cash reserves are depleting fast, the bank's analysts wrote, and stand at $30 million. At $40 million, orders have not risen compared with the third quarter of 2000. CommTouch recently announced staff and spending cuts intended to save it $16 million.

The company attributed its dwindling sales to the intensifying dot.coms crisis and to the general economic slowdown, which is delays corporate decisions. The business sector accounts for 50% of CommTouch's orders.

Hiatus in coverage

Oppenheimer writes that given CommTouch's sharp deviation from its fourth-quarter guidelines, it prefers not to release a forecast for 2001 at this stage.

The bank explains that the company's performance could drastically change depending on the success, or failure, of a limited number of major email solutions deals.

The bank says that the burden of proof now lies with CommTouch. The company will have to provide results showing that it is penetrating the corporate sector, that its volume of orders is expanding, and that it is cutting expenses.

CommTouch shares have lost 96% from March 2000, plunging from $68.5 to $2.25 today. The company's market value has nosedived to $34.5 million.