Critical Path CEO comfortable with earnings, revenue targets

Larry Dignan

Jan. 2, 2002 4:43 p.m. PT

3 min read

Shares of Critical Path (Nasdaq: CPTH) jumped as high 10 percent Wednesday after the company announced four new customers. In an interview with ZDII, Critical Path CEO Doug Hickey said he was comfortable with Wall Street estimates for its second quarter.

Wall Street is expecting a loss of 17 cents a share.

Critical Path shares shot up early, but lost steam. Near midday, it was up 5 percent to 49.

Critical Path, an email and messaging company, said BidCom Inc., Comcast Commercial Online Inc., a subsidiary of Comcast Corp. (Nasdaq: CMCSK),' CIDCO Inc. and OnRadio were the new customers.

Critical Path caters to portals, Internet service providers and corporations, which are viewed as the future growth engine for the company. Critical Path (chart) went public at the end of March and followed up with a secondary offering just six weeks later in a move that was widely criticized.

ZDII spoke with Hickey on Thursday. Here are some excerpts of what he had to say:

On what differentiates Critical Path from other e-mail service providers such as Mail.com (Nasdaq: MAIL) and most recently Commtouch (Nasdaq: CTCH), which went public on Tuesday:

Hickey said other email outsourcing companies are either focusing on the consumer market or trying to make a go of it with business plans revolving around free services and limited offerings. "We offer a full suite of services and get monthly recurring revenue," said Hickey. Hickey said Critical Path gets a fee for each outsourced mailbox.

Hickey said average fees for an ISP or portal are roughly 32 cents a month per mailbox. For enterprise customers that fee is about $4 to $5 a mailbox.

On the company's acquisition strategy: Critical Path has acquired three smaller companies since going public and has plans for more. Hickey said the acquisitions are to "round out the portfolio" and tack on services such as fax and voice messaging to its core email offering.

On why the company launched a secondary offering just six weeks after going public: Hickey said it was to build up the company quickly. "The market has already picked winners in various categories. We wanted to build a warchest," he said. "You can go build your portfolio or go acquire it."

Hickey said the company has $200 million in cash and will use it and its stock to buy a host of smaller companies in deals ranging from about $20 million to $230 million. More deals are likely in the first quarter. If the market tanks, Hickey said Critical Path has the cash to take advantage of opportunistic acquisitions.

On the company's second quarter results due July 22: Hickey said he was comfortable with revenue targets in the quarter of about $1.7 million. Looking forward, the Critical Path chief was also confident the company could meet its profitability targets.

First Call has Critical Path breaking even in the third quarter of 2000 and posting a profit of 9 cents a share in the fourth quarter of 2000. "We feel we are well on our way," he said.