Dougherty & Co Downgrades Openwave Systems (OPWV) to Neutral ;Story Shifts to Patent Licensing. Moving to the Sidelines Given Risk
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Price: $2.92 --0%
Rating Summary:
0 Buy, 0 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 9 | Down: 16 | New: 15
Rating Summary:
0 Buy, 0 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 9 | Down: 16 | New: 15
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Dougherty & Co downgraded Openwave Systems (NASDAQ: OPWV) from Buy to Neutral with a price target of $2.00.
Dougherty analyst says, "With Microsoft (Nasdaq: MSFT) validating Openwave’s patent portfolio (for an estimated $25MM licensing fee), we believe investors will now try and value the company based primarily on the potential size of this patent licensing opportunity. Our best guess is that Microsoft and Openwave agreed on a 10% market share of Windows-based smartphone and tablets over the next four years (a typical licensing industry term)...Thus, the $25MM paid by Microsoft would suggest there is a $250MM total addressable market for licensing Openwave’s patents (or $225MM less Microsoft) in the mobile computing ecosystem."
"The big question is how quickly and easily is that attainable? The core business is performing miserably ($9MM of bookings vs. $37MM of revenue, a 0.2x B:B). We believe Openwave is likely to burn another $0.20 per share of cash from the current $0.77 level even with Microsoft payments if business doesn’t rebound. The core business has a valuable customer list that is probably worth something and we’ve estimated that the NOLs are worth ~$0.30 to an acquirer at a $2.50 takeout price. So if we assume the cash and the core business are worth about $1 per share, then you have to assume Openwave licenses its patents to over 50% of the mobile computing market to get upside in the stock at $2. We think that gives too much credit at this stage and so we are downgrading shares."
For more ratings news on Openwave Systems click here and for the rating history of Openwave Systems click here.
Shares of Openwave Systems closed at $1.57 yesterday.
Dougherty analyst says, "With Microsoft (Nasdaq: MSFT) validating Openwave’s patent portfolio (for an estimated $25MM licensing fee), we believe investors will now try and value the company based primarily on the potential size of this patent licensing opportunity. Our best guess is that Microsoft and Openwave agreed on a 10% market share of Windows-based smartphone and tablets over the next four years (a typical licensing industry term)...Thus, the $25MM paid by Microsoft would suggest there is a $250MM total addressable market for licensing Openwave’s patents (or $225MM less Microsoft) in the mobile computing ecosystem."
"The big question is how quickly and easily is that attainable? The core business is performing miserably ($9MM of bookings vs. $37MM of revenue, a 0.2x B:B). We believe Openwave is likely to burn another $0.20 per share of cash from the current $0.77 level even with Microsoft payments if business doesn’t rebound. The core business has a valuable customer list that is probably worth something and we’ve estimated that the NOLs are worth ~$0.30 to an acquirer at a $2.50 takeout price. So if we assume the cash and the core business are worth about $1 per share, then you have to assume Openwave licenses its patents to over 50% of the mobile computing market to get upside in the stock at $2. We think that gives too much credit at this stage and so we are downgrading shares."
For more ratings news on Openwave Systems click here and for the rating history of Openwave Systems click here.
Shares of Openwave Systems closed at $1.57 yesterday.
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