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Net messaging company Tumbleweed sinks 70 percent

Shares of Tumbleweed Communications plummet after the company says it will miss fourth-quarter estimates and will cut 20 percent of its work force.

Tumbleweed Communications said Wednesday it would miss estimates for its fourth quarter and would cut 20 percent of its work force, citing slumping IT spending and delayed purchasing decisions from customers.

Shares of the Redwood City, Calif., company, which provides Internet messaging services for businesses, dropped nearly 70 percent, falling $6.97 to $3.03 in afternoon trading on the Nasdaq.

The company now expects fourth-quarter revenue to be between $7.5 million and $8 million, a jump of between 65 percent and 76 percent year over year, but lower than the company's previous expectation for the quarter.

Net loss for the period, excluding charges, will come in between $17 million and $18 million, compared with $7.6 million in the fourth quarter of 1999. First Call estimates a loss of 29 cents a share for the current quarter.

Tumbelweed cut its revenue growth target for 2001 to 50 percent to 60 percent over 2000 revenue, down from the previous expectations of 100 percent growth.

In a news release, Tumbleweed chief executive Jeffrey C. Smith said although the company had a good start to the fourth quarter, market conditions changed considerably in December.

As a result, the company will slash 20 percent of its work force and take a one-time restructuring charge in the first quarter 2001.

Smith also said Tumbleweed will change to a subscription-based pricing model in 2001. Smith said the new model would simplify the contract process, increase revenue visibility, and improve the company's cash flow.