Openwave Systems Inc. provides Communication Service Providers (CSPs), including wireless and wireline carriers, Internet Service Providers (ISPs), portals, and broadband providers worldwide, with the software and services they need to build boundary-free, multi-network communications services for their subscribers.

Openwave has a very unique and valuable business in the wireless data market. It has a dominate market share of 50% in both the browser and in the gateway transitions for mobile phones. Both products are a core element in the data cell phone market.

Our philosophy is to own the critical elements in markets that appear to have revolutionary growth. In January 2004 we wrote an article saying the wireless revolution has begun. Today based on very recent guidance from Texas Instrument (NYSE:TXN) Qualcomm (NASDAQ:QCOM) and other third party data it appears that wireless data market is actually accelerating. That appears opposite common wisdom judged by the way the world equity market and Openwave stock is trading for the last month. Usually revolutionary growth acceleration is misunderstood. I believe that robust growth from wireless data will catch many people by surprise when it is fully recognized.

The browser and the gateway business are key’s to Openwave's success. Again it is our philosophy to own critical monopolistic elements inside an industry. We often equate our philosophy to a roof over your head and the gutter that controls the flow of water. Most water when it rain will land on a shingle but will collect in high volume in the gutters. Thus a single gutter can control as much water as all the shingles combined. This model of finding the essential elements or monopolist companies, judged by the many top rankings awarded to us by third party profession indicates a very successful approach.

In wireless data market the gateway and the browsers form what we believe are that critical element in the industry with Openwave a dominate position in both those markets. This dominance of the critical element/monopoly creates a natural mote or barrier as Openwave is in a better position to bundle, integrate, and test its products, thus become a natural extension of their browser and/or gateway for every new service they enters. This bundled approach as Microsoft has proven over time not only has a higher comfort advantage for it’s users but also often could be produced at a far lower cost which the phone companies enjoy. These many economies of scale of a dominate player is attractive to the phone companies when they are both reviewing new or existing services. Put yourself in the place of a large carrier do you want to work with a new firm, with no proven history which would include additional integration, testing, billing plus on going maintenance or would you prefer an existing firm to increase their service or possibly just bundle the service into a existing product. That’s why it’s very hard for new wireless firms to make a presence in the wireless data market and the more established companies to consolidate when newer wire data services form.

It appears industry wide that the consolidators including Comverse Technology Inc. (NADSAQ: CMVT) and Amdocs Ltd. (NYSE:DOX) appear to have advantage over many newer companies. Both of those companies specializes more on the back end. The higher growth market for phones will be with the data services and in my opinion Openwave is the best positioned as the industry continues to consolidate.

About 60% of Openwave quarter is already booked not including about an addition 10% is pay as you go. That means Openwave needs about 30% of addition new revenues in the quarter. That indicates that Openwave has far smaller hurdle rate than most companies. The data supports that the number of new data phones growing combined with the rising usage of each phone with no new major competitive threats entering the market the probability of carriers to reorder is increasing.

Openwave's high valued license revenues.

Last quarter Openwave reported that licensing revenues was over 50% of total revenues and it had 97% gross margins. The licensing revenues make up over 70% of Openwave's gross profit. Understanding Openwave's business model is very simple if the licensing long term grows so will the profits so if licensing long term declines so will the profits.