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Commtouch Acquires Antivirus Division Of Authentium

Command antivirus includes technology to protect against spyware, Trojan downloaders
Sunnyvale, Calif. July 27, 2010 Commtouch' (Nasdaq: CTCH) today announced that it has signed a definitive Asset Purchase Agreement to acquire the assets, products, licenses, and operations of the Command antivirus division of Authentium, Inc., a Florida-based company.

Command antivirus which also includes technology to protect against spyware, Trojan downloaders, and other threats is strongly synergetic with the rest of Commtouchs product portfolio. With the addition of antivirus technology as a new, third product line, Commtouch will be offering a comprehensive set of solutions for inbound and outbound messaging and Web security to its customers, who are networking and security vendors and service providers.

The Command antivirus division currently provides its technology to a notable number of leading service providers and vendors, including Google, McAfee, and Microsoft. Certified by Checkmark, West Coast Labs, and a winner of multiple Virus Bulletin awards, Authentium's Command antivirus technology boasts a small footprint and a highly efficient event-processing system.

Commtouch is expected to pay $4.6 million in cash and an additional earnout contingent upon the achievement of certain revenue milestones through December 31, 2011, which may bring the total amount to approximately $8 million.

The acquisition is expected to be accretive starting the first quarter post-closing and should contribute positively to Commtouchs non-GAAP top and bottom line in 2011. The acquisition will also allow Commtouch to accelerate its rate of growth in revenues and profits.

Broader Offering and Foundations for Growth

In the past 18 months, we have expanded our product offerings from a single product line that of messaging security to three complementary product lines, including the one we are purchasing now. In addition, we have broadened our target markets from a single market OEM vendors to include service providers. We believe that this unique combination of expanded offerings and target markets will set the stage for healthy growth for the coming years, said Gideon Mantel, Commtouchs chairman of the board and chief executive officer.

Mr. Mantel added, Commtouch has considered a number of acquisition opportunities during the past year as part of our long-term growth strategy, and after a thorough examination, we decided that Authentiums Command division is the best fit for our business, both strategically and operationally. We believe that many of our current customers will be eager to consolidate their messaging and Web security needs around a single reliable vendor Commtouch and enjoy the operational simplicity and reduced total cost of ownership that this entails. We are excited about the opportunities ahead.

The transaction will be financed from Commtouchs own financial resources. Commtouch ended the second quarter of 2010 with approximately $16 million in cash and zero debt, and management therefore believes that following payment for the deal, the Company will maintain more than sufficient working capital to fund its existing operations as well as to pursue further opportunities and complete its share buy-back program.

Strong Synergy: People & Products

We are thrilled to join the Commtouch team. We see great synergies between Commtouch and Command, and both companies have a similar focus on both technological excellence and dedicated customer service, said Helmuth Freericks, Authentiums chief science officer. With the acquisition, we will gain additional resources in terms of capital, marketing, and a renewed focus on enhancing the technology; all of which directly benefit our customers and further enable our commitment to world-class protection. We look forward to continuing to serve our customers moving forward as part of the Commtouch family.

Mr. Freericks, who also co-founded Command, will join Commtouchs management team as General Manager, Antivirus Solutions. The rest of the Command employees, including its virus lab analysts, will also be joining Commtouch, under Mr. Freericks leadership.

Combining the skills and resources of both companies, Commtouch plans to leverage the Command technology and continue developing and enhancing it.

Closing of the acquisition is subject to customary conditions and governmental approvals and is to take place by September 30, 2010.

The Company will be hosting a conference call to discuss second quarter results and the deal at 10 a.m. Eastern time on Wednesday, July 28. To participate, please call one of the following teleconferencing numbers by dialing in at least 5 minutes before the conference call commences:

US Dial-in Number: 1 888 407 2553 Israel Dial-in Number: 03 918 0644 International Dial-in Number: +972 3 918 0644

The call will be simultaneously webcast and available afterwards as a replay from the investor relations section of Commtouchs website.

About Commtouch Commtouch' (NASDAQ: CTCH) provides proven messaging and Web security technology to more than 130 security companies and service providers for integration into their solutions. Commtouchs GlobalView and patented Recurrent Pattern Detection (RPD) technologies are founded on a unique cloud-based approach, and work together in a comprehensive feedback loop to protect effectively in all languages and formats. Commtouch technology automatically analyzes billions of Internet transactions in real-time in its global data centers to identify new threats as they are initiated, protecting email infrastructures and enabling safe, compliant browsing. The companys expertise in building efficient, massive-scale security services has resulted in mitigating Internet threats for thousands of organizations and hundreds of millions of users in 190 countries. Commtouch was founded in 1991, is headquartered in Netanya, Israel, and has a subsidiary in Sunnyvale, Calif.

Stay abreast of the latest news at the Commtouch Caf: http://blog.commtouch.com. For more information about enhancing security offerings with Commtouch technology, see http://www.commtouch.com or write to [email protected]

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