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To: Bill Harmond who wrote (3380)	11/22/2000 12:45:29 PM
From: Glenn D. Rudolph	Read Replies (1) \| Respond to of 57684

I doubt that. WAP is more robust. Plus there's no sense in replacing existing infrastructure only to have subscribers twisting in the wind with incompatible handsets. I cannot find anyone stating i-wave is superior. All I can find is speculation that OPWV will lose market share but no one can even confirm that. The market sells the stock in mass without a real reason that anyone can find so maybe it is just the sentiment in the market now. Sell and ask questions later. This sound slike pure guessing at the market move but not at the FA of the company: "Price: $79.68 Estimates (Jun) 2000A 2001E 2002E EPS: d$0.17 d$0.06 $0.25 P/E: NM NM 318.7x EPS Change (YoY): NM NM Cash Flow/Share: NA NA NA Price/Cash Flow: NM NM NM Dividend Rate: Nil Nil Nil Dividend Yield: Nil Nil Nil Opinion & Financial Data Investment Opinion: D-1-1-9 Mkt. Value / Shares Outstanding (mn): $15,795 / 180 Book Value/Share (Jun-2000): $25.12 Price/Book Ratio: 3.5x Stock Data 52-Week Range: $208.00-$50.00 Symbol / Exchange: OPWV / OTC Options: None Institutional Ownership-Vickers: 45.7% ML Industry Weightings & Ratings** Strategy; Weighting Rel. to Mkt.: Income: In Line (25-Oct-2000) Growth: In Line (25-Oct-2000) Income & Growth: In Line (25-Oct-2000) Market Analysis; Technical Rating: Not Rated Intermediate term opinion last changed on 16-Oct-2000. *The views expressed are those of the macro department and do not necessarily coincide with those of the Fundamental analyst. For full investment opinion definitions, see footnotes. Investment Highlights: • Yesterday, OpenWave, the new Phone.com / Software.com merged entity, held a conference call to give an update on the merger process and provide new financial expectations. (OpenWave’s new ticker is OPWV.) • The call did not provide much in the way of new news about the cross-selling of products and services, or about new products such as unified messaging, which we think investors were hoping to hear. Management said it expects to provide more color, including longer term financial expectations, at its analyst day at the end of January. • As the market had largely expected, OpenWave raised calendar 2001 revenue expectations to $580mm (we were at $570mm) and reiterated profitability (excluding goodwill) in March of 2001. • We are maintaining our December Q revenue estimate of $98mm, and raising our EPS to d$0.02 from d$0.04. We are raising our C2001 revenue estimate from $570mm to $580mm and maintaining our C2001 EPS estimate of $0.07. • The market had been concerned that OpenWave would begin recognizing license revenues from the Phone.com side of the business more conservatively. (Most of Phone.com’s license revenues are prepaid, and recognized ratably over the term of the maintenance and support agreement, usually two years; Software.com recognizes license revenues on an as-deployed basis (as mailboxes are activated).) On the call management said there would be no change to revenue recognition. • We think Phone’s recognition of revenues ratably (as opposed to on an as deployed basis) in part explains why revenue per incremental subscriber jumped almost $3 by our count, between the June and September Qs. The potential challenge here is that if subscriber rollouts remain "behind" revenue recognition at Comment Openwave Systems Inc – 21 November 2000 2 the end of a contract term, carriers will not need to buy additional licenses as quickly. (Of course this situation could reverse itself if subscriber rollout outpaces revenue recognition over the term of the maintenance and support contract.) • We think the stock is down for two primary reasons: the call did not provide much new information; and we think some analyst estimates were higher than $580mm in revenue. We think lesser reasons include investor concern about revenue recognition and potential confusion among smaller investors regarding the new ticker symbol. • We would also note that up until now, OPWV had been pretty immune to the stock selloff in other providers of carrier software infrastructure.