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Posted on 07.06.06 by Nikhil @ 4:52 pm
Shares of Openwave Systems (OPWV) fell more than 33% today after the company preannounced its fiscal fourth quarter results which will be formally announced on July 28th. The company said that it booked revenue of $90 million to $92 million, falling way below the $120 million that was expected. Openwave’s reasoning for this was that deals are getting more complex and as a result, the wireless carriers are taking longer to make purchases, which has slowed its ability to convert backlog orders to revenue. Openwave did announce that it had made a systems deal, which had been promised. But the deal was smaller than Wall Street had hoped for at $13 million. Because of the fall in revenue, lower gross margins (about 65% instead of an expected 70%), the smaller systems deal, it looks like earnings per share for the quarter will come in around breakeven, down from an expected $0.23 per share. The stock is likely to remain under pressure for a while, partly due to an options investigation that has been taking place at Openwave and many other companies. This may force Openwave to delay its 10K report. But Openwave is still a strong company that has a backlog of orders amounting to $260 million. I believe shares of Openwave have good upside potential. The company has a lot of cash ($3.50/share) and $122 million in bookings giving it a book to bill ratio of 1.3 Its Forward PE right now is about 7.5 and its price earnings to growth (PEG) is 0.63. Openwave also said that for fiscal year 2007, it expects to generate $450 million in sales and EPS of $0.60. Given its very low valuation right now and the liklihood that revenue and earnings will recover, shares of Openwave are currently a great value play for investors willing to wait at least 6 months. Filed under: Stock Watch and News Comments:
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