RealTime IT News

Openwave Buys Magic4 $82.6M

In a merger of mobile phone software makers, Openwave Systems will buy privately held Magic4 for $82.6 million in cash and stock.

The deal adds new instant messaging, push-to-talk and video applications to Openwave's technology portfolio and eliminates barriers between applications and devices.

It also gives the Redwood City, Calif., company deeper industry contacts. U.K.-based Magic4 boasts contracts with many of the world's top handset manufacturers, including Motorola which took a minority stake in the four-year-old firm earlier this year.

"Our customers will benefit with a better user interface and will reduce their time-to-market," Openwave president and CEO Don Listwin said in a conference call with analysts this morning.

The purchase should close in July. Openwave anticipates Magic4 will contribute $9 million to $11 million in revenue in the second half of 2004, and approximately $35 million in 2005. Magic4 is currently turning a small profit.

Magic4's 140 employees, most of whom work in the UK and India, are expected to stay with the combined company. CEO Simon Wilkinson will work closely with customers in a senior management role and will have cash and equity incentives that continue for 18 months after the sale. Several other senior Magic4 managers will also remain.

This is Openwave's first acquisition in two years. Joshua Pace, Openwave's vice president of finance, said Magic4 met all the criteria: its software fit with an existing Openwave's product line; its facilities are in a strategically important part of the world; and it can add to Openwave's bottom line within two quarters.

Openwave ended the last quarter with $345 million in cash. Pace said the company will continue to evaluate acquisitions where they make sense.

In other Openwave news, the company said it is working with IBM to offer WebSphere Everyplace Micro Environment, a Java technology, as a component of Openwave's Phone Suite Version 7.

The partnership will allow phone makers new choices to meet mobile carriers' requirements for game and application downloads. The combined technologies should reduce production costs by reusing software components, improving memory utilization and reducing the complexity of software integration, Openwave said.

Integration efforts are beginning now. The first phones with the new technology are expected to be shipped in early 2005.

Openwave competes against Comverse , Microsoft and Nokia , among others in the mobile applications space.