In a frank admission of its difficulties, the boss of OpenWave Systems Inc has resigned and the communications software provider said it would explore “strategic alternatives,” including a possible sale.
The Redwood City, California-based company announced last Friday that it had appointed Robert Vrij as president and CEO, to replace David Peterschmidt, who had resigned. Vrij was previously president and CEO of Lucent’s EMEA (Europe, Middle East, and Africa) operation. He joined Openwave in January this year as Executive VP of Worldwide Field Operations.
The company also announced that it had retained Merrill Lynch & Co as its financial advisor to explore a range of strategic alternatives and options to enhance shareholder value, including a possible sale of the company.
Peterschmidt will continue to serve on OpenWave’s board, where he will chair the board’s strategic alternatives committee.
The company has also withdrawn its prior outlook for the next two quarters as sales continue to fall. OpenWave is expected to report its third quarter results on April 25, but it has announced that it is withdrawing its prior financial outlook for its third and fourth fiscal quarters ending on March 31, 2007 and June 30, 2007 respectively.
It blamed this on the inherent uncertainty in predicting the company’s future financial performance due to its product transition.
It now anticipates revenue for the fiscal third quarter ended March 31, to be approximately $65m to $70m, dramatically down from the $113m it made in the third quarter of last year. In January the company said that it was expecting quarterly sales near the $91m mark.
Shares in the company fell 0.67% to $8.84 on the Nasdaq on Friday.
OpenWave stocks have fallen 50% in the past 12 months, and in an effort to quell investor unrest, it began a $100m stock repurchase program in January. It has so far retired more than four million shares.
Yet this has not stopped unhappy shareholders electing to the board a nominee of the investment group Harbinger Capital Partners, which is a 10% shareholder that has been critical of the direction of the company.
It is clear that the company has been struggling financially of late, with six separate restructurings over the past five years. In its second quarter ending December 31, it posted a net loss of $15.8m on sales down nearly 20% at $84m.
The difficulties also come as no surprise to industry watchers. According to senior analyst Tony Cripps at Ovum (a sister company of ComputerWire), the company has long had problems, mostly due to its historically complex portfolio of products and its inability to execute in recent years.
Unfortunately, it could be argued that the company did not move quickly enough to adapt its portfolio to changing market conditions, he told Computer Business Review. Although he believes OpenWave is now doing a good job of rationalizing its product set.
The new product strategy looks more sensible, he said. The company made approximately 13 product announcements at the recent 3GSM conference in Barcelona. It is all about delivering content services now, he said.
It has been difficult for a company of OpenWave’s size to compete against some of the large handset and equipment makers with their huge resources, as well as the more nimble start-ups, Cripps added. He believes the company is adopting a sensible approach by looking at its strategic alternatives.
OpenWave did not respond to Computer Business Review at the time of going to press.