Releasing news after the market closes for the weekend is often a sign that it's not good news you want to be telling people about. Doing so on an extended Christmas holiday weekend should be a portent that it's real bad news.

Apparently, telecommunications software provider Openwave (NASDAQ:OPWV) was hoping investors were too busy buying last-minute gifts and spending the weekend with their families to notice that it finally decided to file the first-quarter 2007 financials it had previously delayed because of irregularities discovered in its stock-option granting practices. As you could imagine, the results were not encouraging.

Revenues slid 12% from the year-ago period to $91.5 million, while its loss widened to $24.5 million, or $0.27 per share, compared with last year's $7.7 million loss. Openwave said that the shortfall in revenues was due to lower licensing agreements -- they dropped by 39% in the quarter -- in the telecom arena as a number of customers consolidated, such as the Sprint Nextel (NYSE:S) merger, which contributes to 20% of the company's revenues. Operating costs, however, rose 8%, primarily as a result of the stock options audit.

Those audit costs, some $5.5 million worth, found that the company had misstated option grant dates on stock options worth more than $197 million and that it would incur about $182 million in additional stock-based compensation and payroll tax expenses. Although management said it found no wrongdoing as a result of its audit, there were insufficient controls and evidence to support the dates of many of the option grants. The bulk of the mispricing occurred in 2001, when three-quarters of the options in question were granted. The stock had been trading at some of its highest levels ever, nearly $400 a share, but by year-end, the shares had lost some three-quarters of their value. Management had canceled many of the higher-priced options and reissued them when the price was more advantageous.

One of the risks pointed out when Openwave was recommended for Motley Fool Rule Breakers last year was the fact that its technology -- it's the stuff that lets you send text messages, email, and photos; browse the Web; and download games and music to your mobile phone -- is so ubiquitous. Cell phones, because they have penetrated so deeply into the marketplace, can't grow simply by adding on new customers. They need to add value. This also presents the opportunities the Rule Breakers analysts saw: the chance to provide more bells and whistles for their phones through Openwave software. Full-function features are not nearly as widespread as the phones themselves.

Yet by relying on a concentrated mix of customers, Openwave opens itself to the sorts of problems which apparently ate into performance this quarter. By having Sprint Nextel and the joint SBC (now AT&T (NYSE:T))-BellSouth (NYSE:BLS) venture Cingular as its primary clients, it carries greater risks should either of them shift their business to competitors.

Fortunately for Openwave, Comverse Technology (NASDAQ:CMVT) has been experiencing its own internal problems, and Microsoft's (NASDAQ:MSFT) mobile operating system was not the big hit it was touted to be -- and so Palm (NASDAQ:PALM) ended up bringing back its own operating system in its latest mobile phone iterations.

With a new management team in place and a changing economic environment, it may take some time for Openwave to regain its footing. While companies like to say the past is behind them and they can now concentrate on the future, the fact is that Openwave will still have shareholder lawsuits to contend with and SEC investigations over its backdating mess. Let's hope it doesn't wait till the next long holiday weekend to fill investors in on the news.

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Openwave is a recommendation of Motley Fool Rule Breakers, the ultimate growth stock newsletter service. A free 30-day guest pass gives you full access to all of the rule-breaking companies, tomorrow's big winners today. Microsoft is a recommendation of Motley Fool Inside Value. Palm is a Stock Advisor pick, and AT&T is a former selection of that service.

Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.