Commtouch Successfully Closes Previously Announced Funding Deals.

Business Editors/High-Tech Writers

MOUNTAIN VIEW, Calif.--(BUSINESS WIRE)--Jan. 5, 2004

Commtouch (Nasdaq:CTCH), a global developer and provider of proprietary anti-spam solutions, today announced that after achieving all closing conditions relating to the previously announced financing deal, it successfully closed the private placement described in its December 1, 2003 press release, with the company having received $3 million dollars. The financing was made against the issuance of convertible notes and warrants that are convertible/exercisable at any time, at the lenders' option, into Commtouch ordinary shares at a fixed price of $1.153. Together with the exercise of warrants by prior convertible note holders - who also converted their notes into equity in the company - the company raised over $4 million in additional cash at the end of 2003.

"While we are extremely gratified to be able to continue to attract important investments in the company, I would be remiss if I did not also mention how pleased we are with the sales activity during Q4 '03," noted Gideon Mantel, Commtouch's CEO. "We were able to win key accounts, and our growing customer base remains uniformly pleased with the performance of our anti-spam solutions.

"We view the successful closing of 2003 as a good stepping stone to 2004, and all at Commtouch are very focused on increasing market awareness of the supremely effective products we have developed to combat spam. With our internal sales, business development and marketing infrastructure in place, plus a large and diverse reseller base, we are poised and determined to accomplish this goal."

About Commtouch

Commtouch Software Ltd. is a global developer and provider of proprietary anti-spam solutions. The company's core technologies reflect its decade of experience as a leading vendor of email software applications and provider of global messaging services. Commtouch is headquartered in Netanya, Israel and its subsidiary, Commtouch Inc., is based in Mountain View, CA. The company was founded in 1991 and has been publicly traded since 1999 (Nasdaq:CTCH). To learn more about Commtouch's solutions, visit our web site at http://www.commtouch.com.

Note: Commtouch(R) is a registered trademark of Commtouch Software Ltd. Other terms and product names in this document may be trademarks of others.

This press release contains forward-looking statements, including projections about our business, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. For example, statements in the future tense, and statements including words such as "expect", "plan", "estimate", anticipate", or "believe" are forward-looking statements. These statements are based on information available to us at the time of the release; we assume no obligation to update any of them. The statements in this release are not guarantees of future performance and actual results could differ materially from our current expectations as a result of numerous factors, including business conditions and growth or deterioration in the Internet market, commerce and the general economy both domestic as well as international; fewer than expected new-partner relationships; competitive factors including pricing pressures; technological developments, and products offered by competitors; availability of qualified staff for expansion; and technological difficulties and resource constraints encountered in developing new products as well as those risks described in the company's Annual Reports on Form 20-F and reports on Form 6-K, which are available through www.sec.gov.