Ever since the two announced their merger in mid-August, a lingering question was what name would Phone.com Inc. and Software.com Inc. call their combined powerhouse.
Last week, the two announced the completion of their merger and in turn named their new company Openwave Inc. Although analysts’ approved the merger, the stock fell about $36 per share in the days following the announcement.
“We didn’t want an `us’ vs. `them’ mentality,” said Chief Executive Officer Don Listwin, explaining why the company did not retain one of the existing, more recognized names. He added the idea was to redefine the new company as something greater than the sum of its parts, which required a new title.
“Besides,” Listwin added, “the cachet around Phone.com is not what it used to be.”
The name
The name Openwave follows another recent trend by not incorporating the “dot-com” moniker. The most popular reason for the omission by many emerging companies today is to disassociate themselves with the struggling dot-com market following this spring’s meltdown. In addition, the dot-com tag generally refers to business-to-consumer Internet firms, and Openwave is anything but.
Openwave customers are what the company defined as communication service providers, or CSPs. They include wireless operators, wireline carriers, Internet service providers, portals and broadband providers. The company said it serves more than 150 such firms with a combined 500 million subscribers.
The products offered these customers include wireless Internet infrastructure and browsers, unified messaging, mobile e-mail, directory services, voice processing, synchronization and instant messaging.
“The next wave of communication is not about PCs vs. appliances, or short-messaging vs. the mobile Internet. It is about connecting people with what is important to them-anywhere, any time, over any device,” Listwin said. “The name communicates the openness of the Internet and its business model, as well as the new waves of technology coming into this market that we are trying to capitalize on.”
Recognizing the value of its discarded domain names, Openwave plans to sell the phone.com and software.com locations for extra revenue.
The company also introduced a national branding effort and advertising campaign promoting the new name and logo. Its new Nasdaq ticker symbol is OPWV.
Integration efforts
In a conference call for investors and analysts, Openwave detailed the efforts under way to integrate the Phone.com and Software.com interests. Listwin identified five phases of integration. The first, securing shareholder approval, was achieved Nov. 17. The second was announced last week, launching the new name and Nasdaq ticker symbol. The third integration phase (expected to last the rest of the year) is to absorb the systems and processes of the two firms into one.
At the end of January, Openwave is planning an analyst’s day to present the financial community with more details on its mission and strategies. The final phase entails extending that same communication to all Openwave employees.
With 12 acquisitions in 25 countries between the two firms, it will be an “ongoing process of building and becoming one company,” Listwin said. “Our mission is to deliver innovative software that enable communication service providers to realize the potential of the Internet.”
The Internet is a disruptive technology for the telecom industry, especially as it grows increasingly mobile, he said. Openwave’s goal is to help those affected companies manage it to their best advantage.
“Our real job is to create technologies that help them realize that potential,” Listwin said.
The company’s motto-“communication without limits.”
Finances
Each Software.com share of stock has been converted into rights to receive 1.6 shares of Phone.com common stock, according to the terms of the merger. Openwave said it expects revenues of $850 million for the whole of next year and expects to be profitable by March.
Analysts felt these figures to be conservative and heaped praises on the newly combined company with “Buy” ratings all around.
“While the new company should continue to be a leader in wireless data and messaging, we believe Openwave intends to broaden its scope to include a wide range of Internet infrastructure for communication service providers of all types-wireline and wireless, broadband and narrowband,” said Marianne Wolk of Robertson Stephens. The firm said 20 percent of Openwave’s revenues already come from cable companies and portals.
Wolk raised her 2001 pro forma estimates to $585 million in revenues for the year and forecasted the firm would reach profitability a quarter earlier that projected.
Credit Suisse First Boston’s Marc Cabi, a stout Phone.com supporter in the past, rolled over his “Strong Buy” rating from Phone.com to Openwave.
“We believe the new company should be a core portfolio holding for investors seeking participation in the proliferation of the mobile Internet,” he said.
The market responded more cautiously, however. Openwave stock fell more than $8 after its first day of trading following the announcement and fell another $11.18 the following day, to $68.50. At RCR Wireless News press time the stock had slid to $51.
The stock slump was blamed on Openwave’s projected revenues falling shorter that the Wall Street whisper number of $600 million, as well as lack of new unified messaging announcements expected in last week’s conference call.
