STOCKS TO WATCH: Critical Path, EDS and Open Market

The other shoe finally fell Friday when the Web messaging software firm announced that Chief Executive Officer Doug Hickey had resigned so that "a new management team can rebuild confidence."

President David Thatcher and William Rinehart, the company's VP of worldwide sales, have also left following a probe into the company's accounting practices.

The company's founder and chairman David Hayden has returned to a management role as executive chairman; Diana Whitehead, currently a senior vice president, was promoted to president, the company said.

Critical Path said earlier this month that it was probing its own accounting practices and that fourth-quarter revenues of $52 million may have been misstated. They also said at that time that both Thatcher and Rinehart had been put on administrative leave.

In January, the company reported a net loss for the fourth quarter of $11.5 million and pushed back its target for profitability by three quarters. At the time, the company said the main reason for the shortfall was that auditors had blocked a bid to recognize $7 million in sales of directory software that had been licensed for resale.

Critical Path also said that it had retained an executive search company to look for a new CEO.

Critical Path shares were halted pending an investigation following the announcement.

EDS shares will provide some interesting theater after a report in the Observer newspaper suggested the computer services provider may be interested in acquiring Sema, a European information technology firm, for as much as $4.33 billion.

According to the report, Sema has confirmed it is in talks with various parties and banking sources say Schlumberger (NYSE: SLB), the U.S. oilfield services to smartcard technology group, is putting the final touches to a deal.

Sema is worth around 2.9 billion pounds, after a rise in its shares on takeover speculation last week.

EDS officials didn't comment on the report.

Last week, EDS topped analysts' estimates when it posted a fourth-quarter profit of $333 million, or 70 cents a share, on sales of $5.2 billion.

EDS shares closed up $1.23 to $63.74 Friday.

The e-business software developer will be active ahead of its fourth-quarter earnings report.

Analysts are expecting it to lose 20 cents a share in the quarter, slightly better than the 29 cents a share it lost in the third quarter.

Open Market shares closed off 9 cents to $3.72 Friday, well off its 52-week high of $65.50 set back in March.

Two of the three analysts following the stock rate it a "hold."

Reuters contributed to this report. >