Openwave Breaking: Fool by Numbers

On Jan. 25, mobile software expert Openwave Systems (Nasdaq: OPWV) released earnings for the fiscal 2007 second quarter, which ended Dec. 31, 2006.

• Revenue growth has turned to revenue shrinkage. Combined with lower gross margins and massive dilution, returns to the common shareholder look horrendous.
  
• The liquid assets are shrinking fast. If the company can't turn a profit sometime soon, management may well need to raise additional funds for its day-to-day operations before the end of the year. There's already plenty of debt and dilution to contend with, though investment interest is outweighing the interest on loan payments today.
  
• It is nice to have an official earnings release rather than the usual "preliminary results" report, though. Openwave's review of past stock option granting practices cost the company $750,000 in the second quarter and $5.5 million in the first, and delayed SEC filings for months. The audit found a few misstated grants, but the committee said there was no proof of any intentional wrongdoing.

(Figures in thousands, except per-share data)

Income Statement Highlights

	Q2 2007	Q2 2006	Change
Sales	$84,160	$104,488	(19.5%)
Net Profit	-$15,788	$8,444	N/A
EPS	($0.17)	$0.11	N/A
Diluted Shares	93,352	79,433	17.5%

Get back to basics with a look at the income statement.

Margin Checkup

	Q2 2007	Q2 2006	Change*
Gross Margin	58.4%	69.9%	(11.5)
Operating Margin	-24.6%	9.0%	(33.6)
Net Margin	-18.8%	8.1%	(26.8)

*Expressed in percentage points.

Margins are the earnings engine. See how they work.

Management Effectiveness

	Q2 2007	Q2 2006	Change*
Return On Assets	-7.0%	12.0%	(19.0)
Return On Equity	-12.2%	10.2%	(22.4)

*Expressed in percentage points.

See how management puts its financial tools to work.

Balance Sheet Highlights

Assets	Q2 2007	Q2 2006	Change
Cash + ST Invest.	$393,067	$542,971	(27.6%)
Accounts Rec.	$149,043	$138,729	7.4%

Liabilities	Q2 2007	Q2 2006	Change
Accounts Payable	$11,468	$12,410	(7.6%)
Long-Term Debt	$148,605	$147,780	0.6%

Learn the ways of the balance sheet.

Cash Flow Highlights

	Q2 2007	Q2 2006	Change
Cash From Ops.	-$10,741.0	$8,957.0	N/A
Capital Expenditures	-$1,503.0	$2,686.0	N/A
Free Cash Flow	-$9,238.0	$6,271.0	N/A

Find out why Fools always follow the money.

Related Companies:

• Sun Microsystems (Nasdaq: SUNW)
• Qualcomm (Nasdaq: QCOM)
• VeriSign (Nasdaq: VRSN)
• Nortel Networks (NYSE: NT)
• Google (Nasdaq: GOOG)
• Intervoice (Nasdaq: INTV)

Related Foolishness:

• Proxy Battle Over Openwave Board Seats
• Won't Someone Please Think of the Children!
• Openwave Pulled Under

Openwave is one of David Gardner's Rule Breakers. Sneak a peek at tomorrow's massive growth today with a free 30-day trial pass to Motley Fool Rule Breakers.

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

At the time of publication, Fool contributor Anders Bylund had no position in any company mentioned. Fool rules are here.