Tuesday, September 26, 2006

Calls of Note Part 3

- CIBC reiterates their Sector Outperform rating on Openwave (NASDAQ:OPWV) and raises their tgt to $12 from $9. A rash of recent deals supports their thesis that key mobile data foodchain participants like OPWV are being aggressively targeted for M&A. Given going takeout prices, firm's implied 1.5x EV/rev target for OPWV remains conservative.

Firm believes Openwave's most attractive assets include: its widely used WAP gateways, which an established OEM/SI could leverage to win more service engagements; the browser business, with its unique penetration among feature phones; & Musiwave, one of the last remaining mobile music plays.

The new tgt also considers the net present value to an acquirer of OPWV's NOLs. OPWV has approximately $1.1B in federally recognizable NOLs and $391M in NOLs recognizable by the state of California. Firm believes these would give an acquirer a tax saving with an NPV of $148M ($1.60/share).

The price target of $12 is at a slight discount to firm's sum of the parts valuation, which pegs Openwave's value at approximately $13. New price target implies and EV/sales value of 1.5x, well below the 2.0x-7.5x takeout multiples fetched in the space in the last several months (including WiderThan, Mobile365, and Mobilitec).

Notablecalls: Nice note but nothing really new in it. Would expect mild buy interest following the call.

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