Hambrecht: Openwave's Dealflow Hampered By Carriers' Restructuring

Obviously, yesterday’s Openwave Systems (OPWV) analyst meeting in New York made quite an impression on W.R. Hambrecht’s Robert Stimson. Today, he downgrades the stock to Hold from Buy, asserting the company’s turnaround will take longer than previously expected:

"Management noted the current environment of M&A activity in the telco space as a major reason behind the deterioration in license revenues over the last two quarters,” Stimson wrote in a research note. “As carriers reevaluate their long-term infrastructure needs and reprioritize spending, the sales cycle has been elongating and pushing out the deal flow that Openwave’s license revenues are highly dependent on…Management believes these large deals are still on the table, and that the weakness should be addressed by its upcoming product cycle…That said, sales execution with Openwave’s upcoming product cycle…will be critical to management’s turnaround plan. Although we think the recently announced deals with KDDI, Telus, Vodafone, and Telefonica are a positive early sign, we believe the highly customized needs of each carrier may increase Openwave’s R&D spend and may impact their ability to deliver these solutions in a timely manner.”

His conclusion: “It is evident to us that this transition will take longer than expected…we will revisit the story when there is clearer evidence that new products are being engineered into telco solutions and spending.”

Openwave shares today are down 21 cents at $8.54.