Rock on, Openwave
The deal, worth at least $121 million in cash and stock with a potential $15 million performance bonus due after 2006, is a good move for Openwave. Music and wireless communication are the perfect partners. Openwave will be able to expand its suite of offerings as well as tap into Musiwave's Rolodex for new client leads.
So when did music and mobiles cement their relationship? Maybe it was when a ringtone knocked Coldplay off the top of the pop charts in the United Kingdom earlier this year. Maybe it was the more recent announcement by Apple Computer
Openwave expects the deal to be accretive to earnings in calendar 2006. Its fiscal year splits that calendar in half, ending in June, but investors have to like a deal that makes perfect sense and will beef up earnings per share to boot. Openwave was already fetching a reasonable 20 times next fiscal year's profits.
The company expects Musiwave to also add $50 million to $55 million to Openwave's top line in the first year. Openwave grew revenues by 32% in fiscal 2005 to hit $383.6 million. So the deal won't materially alter the company's existing revenue mix, though it will enhance it.
Openwave isn't the only player in mobile operating systems. Its java-based browser is up against tough veterans such as Microsoft
Longtime Fool contributor Rick Munarriz does not own shares in any of the companies mentioned in this story. He is a member of the Rule Breakers analytical team, seeking out tomorrow's great growth stocks a day early.