Critical Path Says Financial Problems Confined to Fourth QuarterThe financial irregularities that led Critical Path Inc. to restate its earnings for fourth quarter 2000 and to fire two executives are confined to its fourth-quarter sales in the United States, the company said Friday.
The San Francisco company had said earlier that based on preliminary financial results of an investigation conducted by a special committee, it expects to report revenues for fourth quarter 2000 that are $6.5 million to $8 million lower than previously announced. Critical Path expects $4.2 million of that amount to involve transactions that will not result in revenue.
For the fourth quarter, the messaging and e-mail software company now expects its net loss to increase to between $19 million and $21.5 million.
Critical Path's founder and executive chairman, David Hayden, told The New York Times last week that the company is confident it knows what happened and why. He said the company made some overly ambitious financial projections as a result of pressure from Wall Street to show profits.
"There was a lot of internal pressure on the company to fulfill its promises," Hayden said. "However, in hindsight, it looks like we were unnecessarily and unduly aggressive in forecasting profitability for the fourth quarter."
On Jan. 18, Critical Path released fourth-quarter results, including revenue of $52 million and a net loss of $11.5 million. Two weeks later it said it had formed a special committee to look into possible financial irregularities and that the results may have been materially misstated.
As a result of the financial irregularities, the company fired president David Thatcher and William Rinehart, its vice president of worldwide sales. Critical Path still has to deal with more than a dozen class-action lawsuits filed by shareholders.