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Slashing analytical report on rival Critical Path dunks CommTouch

Critical Path fell like a stone on Nasdaq after downgrading to Out Perform

CommTouch Software

(Nasdaq:CTCH) crashed 25% Friday on Nasdaq, to $3.5 a share. The fall followed financial figures released by competitor

Critical Path

(Nasdaq:CPTH), which was consequently downgraded. But then CommTouch stock had gained 150% over the last six trading days.

Critical Path, which competes with CommTouch in the e-mail market, got totally creamed on Friday, losing 55%.

Critical Path reported income of $52 million for fourth quarter of 2000 and a loss of 16 cents a share. Its results are significantly remote from average analysts' expectations. In addition, the company provided analysts with considerably reduced 2001 earnings estimates.

The company expects 2001 income to total $260 to $250 million, and hopes to become profitable by the third or fourth quarter. Analysts were estimating profitability throughout 2001 and earnings of 3 cents a share by the first quarter of this year.

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Several investment houses cut 2001 earnings estimates for Critical Path following the unpleasant surprise. Goldman Sachs cut income estimates from $309 million to $259 million, and postponed profitability expectations from Q3. Critical Path's stock was also downgraded from Buy to Out Perform.

Given Critical Path's cave-in, CommTouch sinking does not come as a surprise. Critical Path is a key player in the net-based e-mail box market, where CommTouch is one of the leaders.

Technological alliance with Microsoft

CommTouch's main customers are Internet sites or Internet service providers that would like to offer their own customers e-mail services using the company domain name. Meanwhile, CommTouch says it intends to penetrate the more lucrative corporate market.

CommTouch offers corporations outsourcing services for all their e-mail needs. All of CommTouch's activity takes place on its own servers and is managed in-house, releasing client corporations from the headache of running its own e-mail server. CommTouch has a technological alliance with


(Nasdaq:MSFT), which modifies its MS Exchange product to support CommTouch solutions.