Openwave-Could the little company ever become king
Below is a MRR and PLR article in category Finance -> subcategory Stock Market.
Could Openwave Systems Become a Market Leader?
Summary
Openwave Systems Inc. provides software and services to Communication Service Providers (CSPs) globally, supporting both wireless and wireline carriers, ISPs, portals, and broadband providers. The company aims to create seamless, multi-network communication services.Key Points
Openwave holds a strong position in the wireless data market, boasting a 50% market share in mobile phone browsers and gateways. These components are essential to the cellular data landscape.Investment Philosophy
Our approach is to focus on critical elements in markets experiencing revolutionary growth. Back in January 2004, we identified the onset of the wireless revolution. Recent data and guidance from companies like Texas Instruments and Qualcomm suggest that the wireless data market is accelerating, despite contrary market perceptions. This rapid growth may take many by surprise.Core Business Strength
Openwave's success hinges on its dominance in browsers and gateways. Our strategy is akin to controlling the gutter that directs water from a roof, capturing significant value. This dominance establishes a strong competitive barrier, allowing Openwave to offer bundled, integrated, and more cost-effective solutions, much like Microsoft's successful model. Major carriers prefer established firms, as they reduce complexities in integration and maintenance, which positions Openwave favorably in the market.Industry Trend and Positioning
Industry consolidation favors companies like Comverse Technology and Amdocs, which focus on backend services. However, with the growth of data services in mobile phones, Openwave is optimally placed to benefit from industry consolidation.Revenue and Growth
Currently, 60% of Openwave’s quarterly revenue is pre-booked, with an additional 10% on a pay-as-you-go basis. This means only 30% of revenue needs to be sourced within the quarter, a lower requirement compared to many competitors. With increasing data phone adoption and usage, coupled with minimal competitive threats, carrier reorders are likely to increase.Licensing Revenue
Openwave reported that licensing constituted over 50% of its total revenue, with a remarkable 97% gross margin. This segment contributes more than 70% to the company’s gross profit. Licensing growth directly correlates with profitability. In recent periods, licensing revenue has grown at an impressive rate, indicating strong future prospects.Valuation and Risk
Currently valued at around 12 times future earnings, Openwave's market dominance, profitability, and positive outlook in the wireless data industry suggest it should trade at a premium compared to peers.Market Risks
Openwave, like the broader wireless data industry, has experienced significant stock market fluctuations. Those seeking lower volatility may consider alternative investments. A key risk lies in managerial performance, particularly as a new team is in place. While the market has reacted negatively, any minor setbacks may not deter long-term success if forecasts remain intact.Conclusion
Openwave represents a promising investment opportunity. The company, under new management, continues to meet its objectives and maintains a solid position with major carriers. High-margin core businesses and market acceleration position Openwave for potential profitability. With its stock value currently low, it presents an intriguing prospect for investors seeking growth.You can find the original non-AI version of this article here: Openwave-Could the little company ever become king .
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