8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

January 26, 2006

(Date of earliest event reported)

Openwave Systems Inc.

(Exact name of Registrant as specified in its charter)

Delaware	001-16073	94-3219054
(State of incorporation or organization)	(Commission File No.)	(IRS Employer Identification No.)

2100 Seaport Boulevard

Redwood City, CA 94063

(Address of principal executive offices)

(650) 480-8000

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-k filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition

On January 26, 2006, Openwave Systems Inc. issued a press release announcing its financial results for the fiscal quarter ended December 31, 2005. A copy of the press release is furnished as Exhibit 99.1 to this report.

Item 9.01 Financial Statements and Exhibits.

99.1 Press Release issued by Openwave Systems Inc. on January 26, 2006.

Forward-Looking Statements

This Current Report on Form 8-K contains forward-looking statements about the Registrant’s plans, objectives, expectations and intentions, including forward-looking statements regarding the Registrant’s cost reduction plans, including the anticipated costs and timing of such plans. A number of important factors could cause actual results or events to differ materially from those indicated by such forward-looking statements, including problems or delays in implementing the cost reduction plans, general economic conditions and other factors described in the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on September 12, 2005. The Registrant assumes no obligation to update forward-looking statements, except as required by law.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

OPENWAVE SYSTEMS INC.
By:	/S/ HAL COVERT
Name:	Hal Covert
Title:	EVP & Chief Financial Officer

Date: January 26, 2006

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release issued by Openwave Systems Inc. on January 26, 2006.

EX-99.1

Exhibit 99.1

OPENWAVE REPORTS RECORD EARNINGS

Revenue at the High-End of Outlook

REDWOOD CITY, Calif. — January 26, 2006 — Openwave Systems Inc. (Nasdaq: OPWV), the leading provider of open software products and services for the communications industry, today announced that revenues for its second fiscal quarter ended December 31, 2005 were $104.5 million, an increase of $11.0 million, or 12%, from $93.5 million during the December quarter in the preceding year, and an increase of $1.2 million, or 1%, from $103.3 million for the prior quarter ended September 30, 2005.

“We are pleased to announce record earnings today which have exceeded the expectations we set for the company,” said David Peterschmidt, president and CEO of Openwave. “Our performance reflects the efficiencies that now exist in the company and we are optimistic about our ability to capitalize on the opportunities presented by our fast growing market.”

Net income on a GAAP basis for the second fiscal quarter ended December 31, 2005 was $8.4 million, or $0.11 per share, compared to net income of $1.9 million, or $0.03 per share, for the December quarter in the preceding year and a net loss of $7.7 million, or $0.11 per share in the prior quarter.

Net income on a non-GAAP basis, which excludes amortization of intangibles, stock-based compensation, gain on sale of technology, impairment charges, acquisition-related costs and restructuring and related costs, for the second fiscal quarter ended December 31, 2005 was $19.3 million, or $0.22 per diluted share compared with $5.8 million, or $0.08 per diluted share, during the December quarter of the prior year and $9.0 million, or $0.12 per diluted share in the prior quarter. A reconciliation between net income (loss) on a GAAP basis and a non-GAAP basis is provided below in a table immediately following the Condensed Consolidated Statements of Operations.

At December 31, 2005, the Company had cash, cash equivalents, short-term and long-term investments totaling $594.0 million, of which $22.1 million is set aside as restricted cash. On January 13, 2006, the company used approximately $117 million for the acquisition of Musiwave.

Business Outlook

Management’s current outlook for the third fiscal quarter ending March 31, 2006 is that revenues will be within a range of $110 million to $113 million, and fully diluted non-GAAP earnings per share, will be within a range of $0.18 to $0.20. Non-GAAP earnings per share excludes amortization of intangibles, stock-based compensation, and acquisition-related costs and restructuring and related costs.

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Page 2 of 8 — Openwave Reports Second Quarter Fiscal 2006

Conference Call Information

Openwave has scheduled a conference call for 5:00 p.m. eastern time today to discuss its financial results for its fiscal second quarter ended December 31, 2005. Interested parties may access the conference call over the Internet through the Company’s web site at www.openwave.com or by telephone at 800-811-7286 or 913-981-4902 (international). A replay of the conference call will be available for one week beginning at approximately 8:30 p.m. eastern time today by calling 888-203-1112. The replay can be accessed internationally by calling 719-457-0820. Reservation number: 9619410.

A live webcast of the call, together with supplemental financial information, will also be available on the Quarterly Earnings section of Openwave’s website at http://investor.Openwave.com/medialist.cfm for at least 12 months.

About Openwave

Openwave Systems Inc. (Nasdaq: OPWV) is the leading independent provider of open software products and services for the communications industry. Openwave’s breadth of products, including mobile phone software, multimedia messaging software (MMS), email, location and mobile gateways, along with its worldwide expertise enable its customers to deliver innovative and differentiated data services. Openwave is a global company headquartered in Redwood City, California. For more information please visit www.openwave.com.

Non-GAAP Measure

The company’s stated results include a non-GAAP measure, non-GAAP net income (loss), which excludes amortization of intangibles, stock-based compensation, gain on sale of technology, impairment charges, acquisition-related costs and restructuring and related costs from GAAP net income (loss). Management believes the presentation of this non-GAAP information may be useful to investors because the Company has historically provided this or similar information and understands that some investors find it helpful in analyzing the Company’s expenses and comparing them to the expenses of the Company’s competitors or others. Management uses this non-GAAP information, along with GAAP information, in evaluating the Company’s historical and projected operating results, primarily with a view to assessing ongoing expenses exclusive of specific, non-recurring transactions, as may be the case with our gain on sale of technology, restructuring and acquisition-related costs. Management uses the operating results exclusive of our equity-based compensation expense to compare our performance with the Company’s competitors or others. Management does so, in part, because of the divergence of opinion as to the best accounting method of equity compensation, notwithstanding the recent adoption of FAS 123R.

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Page 3 of 8 — Openwave Reports Second Quarter Fiscal 2006

This non-GAAP information is not prepared in accordance with generally accepted accounting principles and may differ from the non-GAAP information used by other companies. Non-GAAP information should not be considered in isolation from, or as a substitute for, information prepared in accordance with GAAP. Moreover, there are material limitations associated with the use of non-GAAP information. In this regard, while some transactions causing the non-GAAP expenses are non-recurring, the Company in the future may effect new transactions, such as acquisitions or restructurings that will trigger similar expenses. Moreover, the Company expects in the future to incur additional equity-based compensation pursuant to FAS 123R as outstanding stock options and restricted stock continue to vest and as a result of the granting of additional equity compensation. For these reasons, our non-GAAP information may not be as useful to investors as the GAAP information also provided.

Cautionary Note Regarding Forward Looking Statements

This release and the scheduled conference call contain forward-looking statements including those set forth above in the business outlook section relating to expectations, plans or prospects for Openwave Systems Inc. that are based upon the current expectations and beliefs of Openwave’s management and are subject to certain risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Notwithstanding changes that may occur with respect to matters relating to any forward looking statements, Openwave does not expect to, and disclaims any obligation to, update such statements. Openwave, however, reserves the right to update such statements or any portion thereof at any time for any reason.

In particular, the following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements: (a) the ability to realize our strategic objectives by taking advantage of market opportunities in the Americas, Europe, the Middle East, and Asia; (b) the ability to make changes in business strategy, development plans and product offerings to respond to the needs of our current, new and potential customers, suppliers and strategic partners; (c) risks associated with the development and licensing of software generally, including potential delays in software development, technical difficulties that may be encountered in the development or use of our software, and potential infringement claims by third parties; (d) the effects of our restructurings and the ability to successfully support our operations; (e) the ability to recruit and retain qualified, experienced employees; (f) the willingness of communication service providers to invest and improve their data networks; (g) the ability to successfully partner with other companies; (h) the ability to successfully manage and integrate Musiwave’s operations and employees, to successfully retain Musiwave’s existing customers, and to continue to grow the Musiwave customer base and revenue in accordance with projections, (i) the ability to acquire additional companies and technologies that complement the Openwave business and to successfully integrate such acquisitions; (j) increased global competition and pricing pressure on our products; (k) technological changes and developments; (l) general risks of the Internet and wireless and wireline telecommunications sectors; and (m) the uncertain economic and political climate in the United States and throughout the rest of the world and the potential that such climate may deteriorate.

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Page 4 of 8 — Openwave Reports Second Quarter Fiscal 2006

For a detailed discussion of these and other cautionary statements, please refer to the risk factors discussed in filings with the U.S. Securities and Exchange Commission (“SEC”), including but not limited to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2005, and any subsequently filed reports. All documents also are available through the SEC’s Electronic Data Gathering Analysis and Retrieval system (EDGAR) at www.sec.gov or from Openwave’s Web site at www.openwave.com

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© 2006 Openwave and the Openwave logo are trademarks and/or registered trademarks of Openwave Systems Inc. All other trademarks are the properties of their respective owners.

INVESTOR CONTACTS: Mike Bishop Sr. Investor Relations Manager Openwave Systems Inc. (650) 480-4461 MEDIA CONTACTS: Hannah Summers Director, Public Relations Openwave Systems Inc. (650) 480-7119 Hannah.summers@openwave.com

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Page 5 of 8 — Openwave Reports Second Quarter Fiscal 2006

OPENWAVE SYSTEMS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS-UNAUDITED

(In thousands)

	December 31, 2005		June 30, 2005
Assets
Current Assets:
Cash, cash equivalents and short-term investments	$	542,971	$	236,555
Accounts receivable, net		138,729		136,865
Other current assets		22,466		21,961
Total current assets		704,166		395,381
Property and equipment, net		17,447		16,765
Long-term investments		28,904		25,909
Restricted cash and investments		22,084		24,293
Intangibles, net and other assets		30,047		34,884
Goodwill		50,769		44,073
	$	853,417	$	541,305
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	12,410	$	10,861
Accrued liabilities		58,829		54,429
Accrued restructuring costs		20,604		20,236
Deferred revenue		51,553		65,623
Total current liabilities		143,396		151,149
Accrued restructuring costs, less current portion		70,862		77,261
Deferred revenue, less current portion		1,893		3,408
Deferred rent obligations		912		691
Deferred tax liabilities, less current portion, net		3,484		5,025
Convertible subordinated notes, net		147,780		147,367
Total liabilities		368,327		384,901
Total stockholders’ equity		485,090		156,404
	$	853,417	$	541,305

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Page 6 of 8 — Openwave Reports Second Quarter Fiscal 2006

OPENWAVE SYSTEMS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS-UNAUDITED

(In thousands, except per share data)

	Three Months Ended								Six Months Ended
	December 31, 2005			September 30, 2005			December 31, 2004		December 31, 2005			December 31, 2004
Revenues:
License	$	50,033		$	48,714		$	45,791	$	98,747		$	83,976
Maintenance and support services		24,259			24,388			22,847		48,647			44,345
Professional services		30,196			30,240			24,897		60,436			48,782
Total revenues		104,488			103,342			93,535		207,830			177,103
Cost of revenues:
License		1,343			2,220			1,090		3,563			1,171
Maintenance and support services		8,141			7,774			6,948		15,915			13,585
Professional services		20,443			21,463			19,401		41,906			34,747
Amortization of intangible assets		1,532			1,581			1,409		3,113			2,550
Total cost of revenues		31,459			33,038			28,848		64,497			52,053
Gross profit		73,029			70,304			64,687		143,333			125,050
Operating Expenses:
Research and development		21,186			24,155			22,372		45,341			44,495
Sales and marketing		28,978			29,506			25,754		58,484			48,798
General and administrative		17,392			17,663			12,257		35,055			22,808
Restructuring and other related costs		(1,370	)		8,275			585		6,905			1,492
Amortization of other intangible assets		714			714			755		1,428			1,280
Gain on sale of technology		(3,250	)		(4,299	)		—		(7,549	)		—
Total operating expenses		63,650			76,014			61,723		139,664			118,873
Operating income (loss)		9,379			(5,710	)		2,964		3,669			6,177
Interest and other (expense), net		999			(330	)		1,600		669			1,357
Impairment of non-marketable equity securities		(104	)		—			—		(104	)		—
Income (loss) before provision for income taxes		10,274			(6,040	)		4,564		4,234			7,534
Income taxes		1,830			1,636			2,698		3,466			4,711
Net income (loss)	$	8,444		$	(7,676	)	$	1,866	$	768		$	2,823
Basic net income (loss) per share	$	0.11		$	(0.11	)	$	0.03	$	0.01		$	0.04
Diluted net income (loss) per share	$	0.11		$	(0.11	)	$	0.03	$	0.01		$	0.04
Shares used in computing basic net income (loss) per share		75,003			70,080			66,073		72,542			65,614
Shares used in computing diluted net income (loss) per share		79,433			70,080			70,340		77,224			68,985
Stock-based compensation by category:
Maintenance and support services	$	605		$	401		$	—	$	1,006		$	—
Professional services		512			387			—		899			—
Research and development		2,116			2,028			90		4,144			208
Sales and marketing		4,203			4,565			378		8,768			501
General and administrative		3,875			2,823			764		6,698			1,117
	$	11,311		$	10,204		$	1,232	$	21,515		$	1,826

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Page 7 of 8 — Openwave Reports Second Quarter Fiscal 2006

OPENWAVE SYSTEMS INC.

RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP NET INCOME

(In thousands, except per share data)

	Three Months Ended								Six Months Ended
	December 31, 2005			September 30, 2005			December 31, 2004		December 31, 2005			December 31, 2004
Reconciliation between GAAP net income (loss) and Non-GAAP:
Net income (loss)	$	8,444		$	(7,676	)	$	1,866	$	768		$	2,823
Exclude:
Restructuring and other related costs		(1,370	)		8,275			585		6,905			1,492
Amortization of acquisition-related intangibles		2,246			2,295			2,164		4,541			3,830
Amortization of stock-based compensation		11,311			10,204			1,232		21,515			1,826
Gain on sale of technology		(3,250	)		(4,299	)		—		(7,549	)		—
Impairment of non-marketable equity securities		104			—			—		104			—
Acquisition-related hedging cost		495			177			—		672			—
Non-GAAP net income	$	17,980		$	8,976		$	5,847	$	26,956		$	9,971
Interest expense on convertible debt, if dilutive*		1,283			—			—		2,565			—
Numerator for diluted non-GAAP earnings per share	$	19,263		$	8,976		$	5,847	$	29,521		$	9,971
Fully diluted net income (loss) per share**	$	0.10		$	(0.10	)	$	0.03	$	0.01		$	0.04
Exclude:
Restructuring and other related costs		(0.02	)		0.11			0.01		0.08			0.02
Amortization of acquisition-related intangibles		0.03			0.03			0.03		0.05			0.05
Amortization of stock-based compensation		0.13			0.14			0.01		0.26			0.03
Gain on sale of technology		(0.04	)		(0.06	)		—		(0.09	)		—
Impairment of non-marketable equity securities		—			—			—		—			—
Acquisition-related hedging cost		—			—			—		0.01			—
Interest expense on convertible debt, if dilutive		0.01			—			—		0.03			—
Non-GAAP net income per share - diluted	$	0.22		$	0.12		$	0.08	$	0.35		$	0.14
Shares used in computing fully diluted earnings per share		87,587			75,026			70,340		85,378			68,985

* The impact of an assumed conversion of convertible debt is included in the non-GAAP fully diluted calculation in the three and six months ended December 31, 2005 as its impact is dilutive to non-GAAP earnings per share.

** For the September 2005 quarter, calculation is the GAAP net loss divided by non-GAAP “shares used in computing fully diluted earnings per share.”

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Page 8 of 8 — Openwave Reports Second Quarter Fiscal 2006

OPENWAVE SYSTEMS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED

(in thousands)

	Three Months Ended									Six Months Ended
	December 31, 2005			September 30, 2005			December 31, 2004			December 31, 2005			December 31, 2004
Cash flows from operating activities:
Net income (loss)	$	8,444		$	(7,676	)	$	1,866		$	768		$	2,823
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation, amortization of intangibles and stock-based compensation		15,892			14,969			6,140			30,861			11,087
Accelerated depreciation on restructured property and equipment		—			414			805			414			805
Provision for doubtful accounts		26			692			1,069			718			2,170
Other non-cash expenses, net		(644	)		(168	)		413			(812	)		684
Proceeds from sale of technology		(3,250	)		(4,299	)		—			(7,549	)		—
Changes in operating assets and liabilities, net of effect of acquisitions		(11,511	)		(6,938	)		(12,197	)		(18,449	)		(33,936	)
Net cash provided by (used for) operating activities		8,957			(3,006	)		(1,904	)		5,951			(16,367	)
Cash flows from investing activities:
Purchases of property and equipment, net		(2,686	)		(3,319	)		(3,395	)		(6,005	)		(5,021	)
Purchases of intangible assets		—			—			(450	)		—			(450	)
Acquisitions, net of cash acquired		—			—			(408	)		—			(46,841	)
Proceeds from sale of technology		3,250			4,299			—			7,549			—
Proceeds (purchases) of investments, net		(129,734	)		(12,214	)		10,939			(141,948	)		9,813
Restricted cash and investments, and non-marketable securities		—			2,116			(952	)		2,116			(1,157	)
Net cash provided by (used for) investing activities		(129,170	)		(9,118	)		5,734			(138,288	)		(43,656	)
Cash flows from financing activities:
Net proceeds from issuance of common stock		285,348			14,239			6,159			299,587			6,926
Other, net		—			—			—			—			(4	)
Cash provided by financing activities		285,348			14,239			6,159			299,587			6,922
Effect of exchange rates on cash and cash equivalents		—			—			842			—			615
Net increase (decrease) in cash and cash equivalents		165,135			2,115			10,831			167,250			(52,486	)
Cash and cash equivalents at beginning of period		128,577			126,462			90,152			126,462			153,469
Cash and cash equivalents at end of period	$	293,712		$	128,577		$	100,983		$	293,712		$	100,983

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