Openwave Shareholders Get Robbed Blind

A large shareholder in wireless software provider Openwave (OPWV) has offered to take a majority interest in the company, but for an amount less than where the shares have been trading. Neat trick.

The pirates at Harbert Management have offered $8.30 a share for 40.4 million shares. The value of the offer is $335 million for Harbert to own 62% of the company. Harbert’s plan’s plans don’t end there. "If we acquire control of Openwave, we intend to recommend that Openwave acquire BridgePort Networks on the basis of their proven management team and technology, which is well-known to Openwave, its employees and customers.

Of course, it is hard to say what BridgePort is worth because it is private.

Who would not want to control Openwave under the plan being floated? The companay has almost $325 million in cash and short term investments.The company does have some deferred liabilities and convertible notes. It is unclear what would become of those.

The current management at the company has done a poor job. The board has been looking at "strategic alternatives" including selling the company and 24/7’s view of that was posted before.

In the first quarter of this year, revenue dropped to $71 million from $113 million a year earlier. Operating profit fell from $6 million in Q1 06 to a loss of $35 million this year. The company blames its reveue drop on a transition to newer products which have not started to produce substantial revenue. That may or may not be true.

What is true is that the stock traded for over $22 last April and there would appear to be a reasonable chance that, if the company’s new products do even modestly well, the stock could move back toward that level.

Since Openwave’s shares are flat at $8.60, the market does not appear to think that the lower price of the offer is going to fly.

Douglas A. McIntyre