REDWOOD CITY, Calif. -- Openwave Systems Inc. (Nasdaq:OPWV), a global software innovator delivering all-Internet Protocol (all-IP) mediation and messaging solutions, today detailed plans to refocus its business and improve operating profit margins.
As a result of the restructuring, the company said it expects to reduce annual Non-GAAP operating expenses by approximately 30%, or $30 - $32 million, on a year-over-year basis. Non-GAAP operating expenses exclude restructuring, amortization of intangibles and stock-based compensation, and amounts associated with certain unusual events. A reconciliation from GAAP to Non-GAAP historical operating expenses can be found on the metrics sheet on Openwave's web site at http://investor.Openwave.com.
The restructuring is intended to reduce operating expenses beginning in the second quarter of fiscal 2012. This restructuring reflects a reduction of approximately 18% to 20% of the workforce, savings associated with reduced discretionary spending, and a significant reduction in labor costs associated with offshore development support.
As part of the restructuring, the company intends to reduce its spending on legacy products and solutions that have been underperforming. The company intends to focus its spending on products with the strongest demonstrated market traction, primarily the new products that are based on the all-IP (internet protocol) messaging and mediation platforms.
"It is clear from the trends of the last quarter - reflected in bookings that were below expectations as well as industry reports of slowing purchasing activity from customers worldwide - that the market for our new products is developing more slowly than we had expected. Our restructuring reflects a disciplined response to the changing market realities, and is consistent with the contingencies of our long-term operating plan," said Ken Denman, chief executive officer. "Our restructuring is designed to allow us to focus on the new products that are gaining traction while reducing our investments in legacy products, realign our R&D to support our narrower portfolio of products and rely more on our channel partners to drive sales. We expect to achieve lower operating expenses while meeting the commitments we have made and will continue to make to our customers."
As part of the restructuring of R&D to better manage product development and realize cost efficiencies, Openwave's Belfast division will undertake additional development work previously outsourced to offshore development centers. The spending on those centers will be reduced.
Openwave also plans to reduce its direct-sales programs, shifting toward a multichannel sales approach. It will focus its sales resources on established markets with the largest concentration of current customers and it will rely more heavily on channel partners in additional markets to reduce expenses.
The company expects the restructuring to have the following effects on Non-GAAP results in fiscal 2012: gross margins in the mid- to high-50 percentile in 2012; R&D expenses in fiscal 2012 to be approximately 20% of total revenue; sales and marketing expenses to be approximately 20% of total revenue; and G&A expenses to be approximately 10% of total revenue.
The company expects to recognize restructuring costs of approximately $6 million in the first quarter of fiscal 2012.
About Openwave Systems
Openwave Systems Inc. (Nasdaq: OPWV) is a global software innovator delivering all-Internet Protocol (all-IP) mediation and messaging solutions that enable communication service providers to create and deliver smarter services.
Building on its mobile data heritage, Openwave mobilizes the Internet with data-driven solutions that comprehensively enhance IP traffic and increase the value of the mobile network. Openwave arms its customers with a 360-degree view of network activity plus the tools to help them proactively optimize network resources (Congestion Control), react to user behavior with smarter data plans and services (Price Plan Innovation), and deliver a contextually relevant messaging experience (Converged Messaging).
Openwave is a global company with a blue chip customer base spanning North America, Latin America, Australia and New Zealand, Asia, Africa, Europe, and the Middle East. Openwave is headquartered in Redwood City, California.
Cautionary Note Regarding Forward Looking Statements
The statements in this press release regarding Openwave's expected reduction in annual operating expenses and the timing thereof, expected reduction in overall headcount, expected reduction in spending on legacy products and solutions that have been underperforming, intended focus on spending in the future, ability to meet customer demands following these reductions, expected shifts in development work and reduction in sales approach, expected effects of the restructuring and financial results in fiscal 2012, and expected recognition of restructuring costs in the first quarter of fiscal 2012, are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1943 and Section 27A of the Securities Act of 1933. These forward-looking statements are subject to many risks and uncertainties that could cause actual results to differ materially from those projected. Notwithstanding changes that may occur with respect to matters relating to any forward looking statements, Openwave assumes no obligation to update the forward-looking statements included in this press release.
In particular, the following factors, among others, could cause actual results to differ materially from those projected: unexpected difficulties in carrying out the restructuring plan may result in expense reductions being lower than expected, or in delays in achieving the expected expense reductions; implementation of the restructuring plan may place a significant strain on the company's managerial, operational, financial, employee and other resources, which could result in adverse effects on the company's business and financial results; and the employee reductions could impair the company's marketing, sales and customer support efforts or limit the ability to meet customer demands as expected.
For a detailed discussion of other risk factors related to Openwave that may cause these forward-looking statements not to come true, please refer to the risk factors discussed in the Openwave's filings with the U.S. Securities and Exchange Commission ("SEC"), including the company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2011. These documents are available through the SEC's Electronic Data Gathering Analysis and Retrieval system (EDGAR) at www.sec.gov or from Openwave's website at www.openwave.com.
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