chief Dave Peterschmidt has addressed some of the issues that bug investors about the wireless software shop, but doubters remain.
Shares of the Redwood City, Calif., tech shop have jumped 15% since last Thursday, when the company posted solid numbers for its fiscal second quarter ended last month.
Cost cuts helped drive the better-than-expected earnings performance. But guidance, while slightly improved, didn't suggest that a long-anticipated boom was around the corner.
In an interview Monday, Peterschmidt says a shift in strategy cooled orders. But he emphasizes that after a little adjustment, the good times are definitely ahead.
The CEO, who is now one year on the job, has changed the terms of software deals, moving away from a heavy reliance on service agreements with telcos and toward more licensing arrangements that carry higher margins.
As a result, says Peterschmidt, there were "no big system deals for the last two quarters. But we will start to see them again, with higher licensed content."
Openwave is trying to earn respect on Wall Street after years of disappointment. The company has somehow been able to sit in a tech sweet spot for the better part of a decade while reaping few rewards. One billion cell phones have Openwave browsers, and the company is a leader in wireless data servers, yet the wireless Net revolution hasn't exactly transported the stock.
A few issues have hung over the company. One is its huge billing and collection morass. The company recently reduced its days of sales outstanding, or DSOs, reflecting the time between orders and the actual booking of revenue to just under four months from just over four months. But investors say there's a long way to go and feel no comfort with DSOs of 119.
Openwave has also missed a few key trends. After U.S. wireless telcos built music sites to sell song downloads, Openwave belatedly perhaps bought a European company called Musicwave to develop a song-selling application.
Peterschmidt doesn't see music as a missed boat.
"Our timing is pretty good," he says. "With Musicwave we have a third leg to deliver end-to-end user services." And even though phone companies have built their own online music stores, they may decide they don't need "a bunch of software and hardware to run a music service." Or, he says, they may chose to "have multiple music services."
Peterschmidt says he is excited to build on a partnership with
to have Openwave software preloaded on phone chips. And he says there are big opportunities ahead with things like local advertising on cell phones through the use of location-based software services.
While Openwave appears to have a lot of opportunities, it also has a few issues to sort out. As one investor says, "I'd like to see some more proof before we get involved."