Openwave Opens With A Thud, But Better Days Are Ahead
America Online and Time Warner can only look on with envy.
Less than four months after announcing their $6.4 billion merger, wireless software developer Phone.com and Internet messaging software vendor Software.com on Monday became Openwave Systems. The new company began trading Monday under the Nasdaq symbol
AOL and Time Warner, in interminable contrast, have had to cool their heels for more than 10 months while government regulators in the U.S. and Europe strong-arm the two companies for concessions presumably aimed at ensuring fair competition before signing off on their proposed union.
Of course, the AOL-Time Warner deal, valued at $129 billion, would create the largest digital entertainment company in the world, hence the protracted regulatory interest.
While of lesser immediate magnitude, the Phone.com-Software.com merger creates a potential wireless data powerhouse at a time when investors are anxious to identify and bet on winners in the highly touted wireless arena.
Indeed, when announced in early August, the agreement was well-received by the market. Phone.com shares rose 17% in one day, while Software.com climbed 32%.
In its first day on Wall Street, however, Openwave was having a rough go of it, with shares down 13.4% to $76 by early noon Monday, despite optimistic, revised earnings and revenue forecasts from company executives.
A great part of OPWV's stumbling debut certainly could be attributed to Monday's market nosedive. The Nasdaq was down 4.6% by early afternoon, while internet.com's Internet Stock Index, or ISDEX, had plummeted 7.0%.
But investors shouldn't let the current market malaise obscure the fact that the merger creating Openwave makes sense, unlike so many other Internet-related marriages (Exhibit A: Excite and @Home). Software.com's messaging software for e-mail and unified messaging is a perfect fit for Phone.com's wireless services and voice portals.
As Openwave, the company will be a formidable and flexible provider of unified voice-data communications software for the wireless carrier market and network service providers, selling products that will make mobile phones and other handheld devices Internet-enabled.
The company also has a well-respected, marque CEO in Don Listwin, former head of Cisco Systems' service provider and consumer division. Listwin predicted in a conference call on Monday that OPWV's revenues in calendar year 2001 will be $580 million, versus earlier internal forecasts of $515 million.
Listwin also says Openwave should be profitable on an operating basis by the end of next year's first quarter. Until then, I think investors may be cautious about OPWV. But a profitable market leader in a high-growth sector such as wireless is the kind of company that will attract support in the long-term.
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