Commtouch Stock Drops 42 Percent As Earnings Estimates Are Cut Sharply

[Netanya, ISRAEL] Commtouch (CTCH) stock skidded 42
percent to $2.25 in heavy trading Tuesday after announcing that fourth quarter
2000 estimates would be below the company’s previous expectations and
trimming 2001 expectations by more than 40 percent.

The company also said it will cut staff worldwide by 20 percent.

The company said revenues will be approximately $5.5-$6 million for the
quarter and earnings guidance for fiscal year 2001. Based on the company’s
current economic outlook, fiscal 2001 revenue is expected to be in the range
of $40 to $45 million.

In a November presentation to Israeli investors, Commtouch was predicting
bringing 2001 revenues as high as $74 million. The company at the time
predicted it would become profitable by the fourth quarter and post earnings of
3-4 cents a share before amortization of goodwill.

“We are revising our 2001 revenue expectations to reflect the current
economic downturn that occurred in the later half of 2000, particularly in the and online consumer sectors, and to reflect the longer sales cycle
with our enterprise channel partners,” Commtouch chief executive Gideon
Mantel said in a statement.

The company said it is increasing its revenue forecast for messaging
products and services to the enterprise and service provider markets.

“We are very pleased with the results we are achieving in delivering a core
messaging platform solution for the large enterprise and service provider
markets,” Mantel said. “Internal changes include reducing our operating
expenses supporting the dot-com and destination site markets, closing our
e-commerce division and e-mail services for small community sites and driving
greater efficiencies in channel sales and marketing to the enterprise market.”

Those changes, which call for cutting staff by 20 percent, will cut the
company’s overall operating expenses by $16 million.

“Our financial position remains strong,” the statement said. “Our cash balance
of approximately $30 million is sufficient to enable us to reach profitability…by
the fourth quarter of 2001.”

Commtouch is hosting a conference call today at 9 a.m. EST. To access the
conference call over the Internet, log on to under
“Investor Relations.” To listen to the call, dial 800-205-6183 or 415-908-4701
(for International callers).

A replay will be available two hours following the call on the company’s
website under “Investor Relations,” or by calling 800-633-8284 and entering
reservation code #17396931.

Commtouch has its headquarters in Netanya and Silicon Valley and offices in
Los Angeles, New York City, Miami, London and Tokyo.

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