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Tucows to Acquire Critical Path’s Hosted Messaging Infrastructure and Customer Base

Big changes are afoot at the company where I work (and hold the longest title) in

the coming year. One of them is an agreement with Critical Path, which

we announced minutes ago. I’ll let the press release do the talking…

TORONTO, CANADA (December 14, 2005) – Tucows Inc. (AMEX:TCX, TSX:TC) today

announced that it has signed a definitive agreement with Critical Path,

Inc. to acquire substantially all of Critical Path’s hosted messaging

assets, including the customer base, hosted messaging communications

infrastructure, and other related assets, such as goodwill and a

software license for Memova™ Messaging, for up to US $8.0 million in

cash plus the assumption of some related contractual liabilities.

Tucows will maintain the hosted messaging data centers in Denver,

Colorado and London, England. Tucows will also offer employment to the

majority of Critical Path’s hosted messaging operations and support

teams located in Toronto, Ontario.

“With this acquisition, Tucows becomes a leader in hosted

email, especially hosted email for Internet service providers and web

hosting companies,” said Elliot Noss, President and CEO, Tucows Inc.

“It is consistent with our strategy to be a leading provider of

Internet services to service providers. It will deepen our

relationships with existing customers, add a number of new service

provider customers and further diversify our revenue streams.”

“We believe our plan will result in a seamless transition for our new

customers” said David Woroch, Vice President of Sales & Marketing,

Tucows Inc. “We intend to grow the hosted email business by providing a

greater customer experience through our focus on the needs of our

service provider customers and leveraging the features of the Memova

Messaging software.”

“We are excited about the relationship with Tucows,” said Mark

Ferrer, CEO and Chairman, Critical Path. “It gives Critical Path the

ability to continue to offer multiple delivery options for our

software, while allowing us to focus on our core strength – software

development.”

The acquisition will be accounted for as a purchase transaction and has

been approved by both companies’ boards of directors. The acquisition

is anticipated to close January 3, 2006, and is subject to standard

closing provisions and conditions.

From

my point of view as the developer relations guy, this is exciting —

not only does this bode well for the company, but there’s also Critical

Path’s email infrastructure and technology that I’ll get to look at,

document and promote. You can’t give a techie a better Christmas

present than new tech (and new techies to hang out with, too).

If

you’d like to know more, check out the Hosted Email FAQ on the Tucows site, which includes the answers to questions such as:

Here’s our CEO, Elliot Noss (on the balcony), making the announcement to

the Tucows staff. Note the space: we can easily accomodate a few extra

dozen coworkers.

If you’d like something a little more up-close-and-personal, you can hear CEO Elliot Noss talk about it himself in

this podcast

(it’ll first take you to a disclaimer page — read and understand the

disclaimer and then click the “I read and understood it” button, after

which you’ll be taken to a page with the podcast). In the podcast, he

answers these questions:

  1. Why is Tucows acquiring Critical Path?
  2. What are the financial implications of this transaction?
  3. Tell us more about the email and broader messaging space.
  4. Was this a good deal for Tucows?
  5. Why did you choose to do this as a podcast?

You get three guesses as to whom the very smooth and professional-sounding interviewer in the podcast is.

15 replies on “Tucows to Acquire Critical Path’s Hosted Messaging Infrastructure and Customer Base”

I woke up this morning in Bangkok and saw this news. I am certainly interested in how this affects the stock price tomorrow.

What is the overall feeling among the employees at Tucows about this?

Joey,

You said. “big changes are afoot at the company where I work in the coming year. One of them is……”

What are the other changes that are coming?

So does that mean it is you in the podcast asking questions?

by the way, that is one heck of an ugly office. as a shareholder, it is quite all right with me to do some remodeling and put in a proper ceiling to work under. the place looks like a factory.

Yes, that’s me as the interviewer. It’s the first of a number of podcasts that I’ll be working on over the coming year, in both audio and video form.

As for the factory-like workspace, well, that’s working in a “warehouse conversion” or “office loft”. This is typical for the high-tech industry; in fact, every office I’ve ever worked in full-time that wasn’t an apartment of mine or a friend of mine, with one exception, has been in a converted warehouse or factory. I — and many others — prefer factory retrofits in funky neighbourhoods to drop-ceilinged offices in buildings in suburban white-collar business parks.

What a great voice. I’d love to pay you to make some romantic sounding tapes for me. I have a girlfriend who likes your type of soothing savvy voice. She likes to listen to DJ’s on the radio when we get romantic. We played that podcast last night over and over as we laid in bed. Her body shivered slightly each time you spoke so I’d really be interested in obtaining a full one hour tape of your voice for us to spice up our lives.

I showed her your wedding blog and she started getting jealous of Wendy. She asked about Wendy was so lucky to have a guy with such a good voice. I have a very raspy voice because my vocal cords were damaged in a car accident. What can I do? Anyway, let me know if any recordings are available.

On a more serious note, I see that posters on the Yahoo Critical Path stock message board are saying that these assets were generating a loss for their company.

So I am curious as to why Tucows feels they will immediately generate positive cash flow from these assets. Is it your infrastructure?

Hey, Spammer! Sorry for taking a bit to get back to you.

The general reaction looked pretty good at the meeting when it was announced; there were lots of eyebrows raised in that “hey, that’s pretty cool” way.

Hey, Spammer!

Among the changes in the coming year:

  • Improved process: We’ve tweaked product lifecycle management, we’ve codified our set of “best practices”, we’ve all been trained on them, and even this early in the game, we’re already seeing some results. I expect the payoffs will be even better in the coming year.
  • Improvements in our software: We recently hired a manager in charge of defect control and maintenance whose primary function is to manage the process of fixing bugs across all the services on the Tucows platform. While project and product managers also manage the fixing of bugs within their own specific mileus; this manager looks at bug-fixing from a platform-wide point of view. From my casual looks at the bug management tracker, we’re already doing a much better job of quantifying and managing defects and feature requests. End result: a much better platform.
  • Increased efforts in professional services: For those customers who need customized client software that interacts with our platform, we’re providing all sorts of help, from something as all-out as development teams to build these custom applications, to me, whose job is to make sure that developers can integrate their systems with our platform. Speaking of me, there’s also…
  • Very serious developer outreach in the coming year: The 2006 developer relations plan that Ross and I have worked on will have me cranking out a lot of documentation and white papers, attend developer meetings and conferences, providing developers with documentation, utilities and incentives to build on the Tucows platform.

Are you sure it’s not Elliot’s voice that she’s reacting to? I’ve heard several unfounded rumours that there’s a 1-800 number that many women call just to hear him say things like “P/E ratio”, “messaging space” and “forward-looking statement”.

For a definitive answer, I’m going to have to defer to one of the “suits”. They know way more about the business details of the acquisition, and they have the business data. I don’t.

What Critical Path brings to the table is their technology and expertise in the mail/messaging sphere, while we’re bringing the relationships and bundling with other services in our platform. It’s the combination that should lead to the aforementioned positive cash flow.

Joey,

Thank you a great deal for taking the time to respond to my questions. I really appreciate it.

pax vobiscum

Can you explain to a novice just what Hosted Messaging is? Some examples of companies that use it and why? My webhost offers me three choices for managing email Neomail, Horde and Squirrel, have these got similar functions to CP’s Hosted Email or are they a totally different function?

Average cost based on Financial information is that Critical Path had about 200 customers spending on average $30,000 a quarter for this service. Just seems like not much growth or demand for this service if after 6 years only 200 customers in a market the size of the US. But, I don’t really understand it.

The Memova Messaging technology for mobile users seems to be the major up and coming thing with huge growth possibilities in this Hosted messaging and this is only being licensed to Tucows. Not sure how you could even make use of the mobile side which seems to be better suited for the majors such as Rogers telus Bell etc. in Canada

Comments?

Goldberry,

It looks like your questions are getting dodged. I guess the best place to read about it is here.

But maybe Joey is planning a new post on his blog about hosted messaging. Who knows? He is usually a reliable and consistent person so I am sure we will see more on this topic.

Maybe they are away for the holidays. The questions I posed should be pretty simple for someone at his level to answer, I am sure there are lots of people like me who lack an understanding of just what hosted messaging is and it cannot be as simple as the link http://hostedemail.tucows.com/ you provided, if the average customer spends $30,000 a quarter and Critical Paths penetration was only 200 customers. I just cannot see how this fits in with the typical Opensrs reseller who have very few large corporate customers running their internet requirements through them.

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