Openwave Systems Inc. has put up the ‘for sale’ sign. The question is, who wants it?
The Redwood City, Calif.-based developer last week announced the resignation of CEO David Peterschmidt and said it has retained Merrill Lynch as a financial adviser to explore strategic alternatives including a possible sale. Peterschmidt was replaced by Robert Vrij, who formerly served as president of worldwide field operations for Openwave.
Openwave, which develops wireless Web browsers and other mobile software, also withdrew its prior outlook for the third and fourth quarters due to “inherent uncertainty” during a product transition. The company forecasted revenue of $65 million to $70 million for the quarter ending March 31, substantially below Wall Street’s expected $87.5 million in revenue.
The announcement comes amidst a proxy battle with Harbinger Capital Partners, Openwave’s second-largest shareholder. The New York-based
investment firm owns roughly 10.6 percent of Openwave, and has publicly fought in recent months to reconfigure the company’s board.
Streak of bad news
And it continues a streak of bad news that began a year ago when Openwave was snagged in a stock-option backdating scandal that ensnared a host of tech companies. An investigation by the Securities and Exchange Commission led to earnings restatements and class-action lawsuits, and prompted the company to eliminate several front-office positions. Openwave shares have collapsed in the last year, falling from a 52-week high of $22.95 in April 2006 to $8.71 following Friday’s closing bell.
Despite its recent woes, though, Openwave could make for an attractive target. Its customers include Motorola Inc., Sprint Nextel Corp. and Cingular Wireless L.L.C., and it has a strong alliance with Qualcomm Inc., which serves as a platform partner.
The company continues to gain traction with personalized services such as Smart Radio, which is offered through its Musiwave subsidiary. Musiwave powers mobile music services for more than 35 operators around the world including Vodafone Group plc, T-Mobile International, Telefonica S.A., Orange and Telus Corp.
Indeed, Openwave seems to be floundering despite some innovative offerings. The company’s key strategy of exploiting wireless networks to build consumer profiles and deliver targeted content resonates with carriers, which are increasingly threatened with becoming “dumb pipes” for place-shifting technologies and Internet services such as Google Inc. and Yahoo Inc.
Potential acquirers include Openwave’s carrier partners or Qualcomm, but such a move could jeopardize the company’s business relationships with other allies. Instead, analysts speculate the developer could be a good pick-up for a company looking to gain more of a foothold in the mobile space.
“The one company that we do think could snap this up and instantly have all of the affiliate and client relationships is Google,” according to a post by Jon C. Ogg of 24/7 Wall St., a financial news and analysis site. “If not there are about 12 other companies that could be interested.”