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Just found this news under IDTC on AOL..............
CommTouch 'Freemail' Is Headed for Sale: IPO Focus
Ein Vered, Israel, Feb. 17 (Bloomberg) -- CommTouch Ltd., which developed a Web-based electronic mail system that lets users from Beijing to Caracas send free messages in their native languages, plans to sell shares in the U.S. this year and raise as much as $50 million to fuel growth around the world.
The eight-year-old company, started in a converted chicken coop in Israel and now based in Sunnyvale, California, earns revenue of several million dollars a year from software sales and through managing e-mail for Web portal sites such as Excite, Business Week and the Discovery Channel. It plans to use the proceeds from selling 25 percent to 35 percent of its stock to improve its network and expand marketing in the U.S., Europe and Asia.
Chief Executive Gideon Mantel says profits will eventually come from advertising and from selling add-on services -- such as faxing, paging and long-distance telephone calls through the Internet -- to the millions of users drawn by the e-mail give- away. He needs to persuade skeptics, however, that ''freemailers'' will take the bait.
''They really understand e-mail and their technology is among the best,'' said Elizabeth Van Couvering, a London-based analyst for Jupiter Communications, an Internet research firm. ''What they're trying to do is to build user loyalty and direct it toward more profitable channels.''
Third-Quarter Offering
CommTouch is talking to underwriters and plans a public offering in the year's third quarter, said Mantel. He also doesn't rule out a sale of the entire company, whose major investors include Boston's HarbourVest Partners, Israel's Apax- Leumi Partners and Japan's CSK Ventures.
E-mail industry leader Hotmail, which now has more than 13 million users, was bought last year by Microsoft Corp. for an undisclosed price that was estimated as high as $400 million in Microsoft stock, largely for its list of 9 million subscribers at the time.
By comparison, CommTouch now provides e-mail services for 4.1 million subscribers and expects to reach 10 million users by end 1999.
Its service is available in French, German, Spanish, Portuguese, Danish, Norwegian, Swedish, Chinese and Japanese. Hebrew and Arabic are on the way after programmers adapt the software to their distinctive right-to-left scripts.
Web Hubs
Few of its users have ever heard of CommTouch or Israeli- born Mantel. The public sale could change that with an emphasis on marketing steered by Isabel Maxwell, CommTouch's president and daughter of the late British media mogul, Robert Maxwell.
Until now, the company has worked behind the scenes to let better-known Internet hubs offer free e-mail, one of the biggest growth areas on the Internet. CommTouch won the contract to manage Excite's European e-mail services because of its multilingual capabilities, although it doesn't run Excite's U.S. e-mail. Through similar partnerships in China, Japan, France, Venezuela and other countries, CommTouch is adding 25,000 new users a day.
''We see web-based e-mail as becoming the center of personal communication,'' Mantel said in a telephone interview from his Silicon Valley home. ''Once people realize they can fax, page and make telephone calls more cheaply through the Internet, they'll pay for the premium services.''
Among the company's biggest hopes for building name recognition and gaining new subscribers is the recently launched ''ZapZone,'' which allows anybody to set up a free e-mail service, using their own name as the sub-domain, or address.
The free addresses carry a short tag with the Zapzone's initials, thus bill@gates.zzn.com could be a vanity alternative for the software tycoon if he were looking for a bargain. His wife, child, parents and friends could substitute their own name at the beginning of the address and conduct their correspondence through Gates-Mail.
While the Zapzone is targeted at fan clubs, alumni organizations and other ''affinity groups'' that are not necessarily commercial businesses, CommTouch hopes to make money by splitting revenue with the premium services and getting users hooked on electronic commerce.
Last month, CommTouch signed with IDT Corp.'s Net2Phone service to let its e-mail users make cheap phone calls through the Internet.
Internet IPOs
Following last year's record public offering by theglobe.com, and successful share sales by other Internet companies such as DoubleClick Inc. and EarthWeb Inc., CommTouch is betting its stock will also be a hit with investors. A competitor, Critical Path Inc., filed for an initial public offering Feb. 2.
Free e-mail services have boomed since early last year when Microsoft Corp. bought Hotmail, which is also based in Sunnyvale. Advertisers want the demographic information that users are asked to supply -- even though the accuracy of self- reported income and education is open to question -- in return for the freebie. Users appreciate the fact they can send and receive messages anywhere in the world they can get Internet access.
Many people whose companies supply them with e-mail accounts also sign up for a free address, knowing their workplace accounts can be seen by the boss.
Van Couvering put CommTouch among the ''best of the breed,'' together with such free services as Iname.com and Net@ddress. She said no other company offers the multilingual capability that has allowed CommTouch to expand in Europe and Asia.
Other industry analysts, however, express doubts over the company's long-term prospects, particularly whether people drawn by free e-mail will spend money on other services.
''CommTouch has an interesting idea, but we don't see it as a slam-dunk success story,'' said Carl Howe, director of computing strategies at Forrester Research in Boston.
'Viral Marketing'
Mantel has been working with e-mail since he started the company in 1991 with programming chief Amir Lev on Moshav Ein Vered, an agricultural collective 20 miles north of Tel Aviv. CommTouch software products for managing electronic messages, particularly one called ProntoMail, won plaudits from computer magazines.
10:49:40 02/17/1999
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