Cell-phone software specialist Openwave (NASDAQ:OPWV) reported lower revenues, but also a smaller net loss year over year in its fourth-quarter earnings release last night. Right out of the gate in the conference call, CEO David Peterschmidt admitted that the quarter was disappointing from a financial standpoint, and proceeded to lay out a strategy for achieving long-term profitability. That's the spirit! Let's have a look at his proposed measures.

The plan appears to rest on two main ideas: rolling out compelling new products, and cutting costs. The upcoming product line will be explained in more detail in the next quarterly earnings call, but it looks like Openwave is hoping to upgrade our cell phones from just musical ring tones to video clips. That feature was just made available to VodafoneItaly (NYSE:VOD) customers through Openwave subsidiary Musiwave.

As for cost-cutting, the company will cut administrative staff in the next 30 days. Sales and marketing staff is safe for now, as is the R&D department, since the cuts are aimed at reducing unnecessary administrative costs. Sales and research remain as important as ever.

It's unclear exactly how deeply management will cut here. With the options backdating investigation hanging over the company like a Sword of Damocles, along with the upcoming changes to reporting rules, I would expect to see an announcement of changes to the stock-based compensation policies within the month.

Openwave is riding rough seas right now, and it really can't afford the distraction of accounting scandals, whether or not the allegations are true. But it could have been worse -- if Openwave is knee-deep in that quagmire, competitor Comverse (NASDAQ:CMVT) seems to be neck-deep, having lost its CEO, CFO, and general counsel over its own backdating scandal. If these companies aren't careful, other handheld software hopefuls like Microsoft (NASDAQ:MSFT), Palm (NASDAQ:PALM), or Symbian (majority-owned by Nokia (NYSE:NOK)) could swoop in and steal market share here.

Further Foolishness:

Openwave is a Rule Breakers recommendation, and Microsoft and Vodafone are both Inside Value picks. Palm is a Stock Advisor pick. To see why Fools like diversification, try a 30-day trial to one of our services.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings if you like. Foolishdisclosureisn't going anywhere anytime soon.