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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended September 30, 2007

or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission
File Number: 001-16073

OPENWAVE SYSTEMS INC.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 94-3219054                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                            |  |           
|------------------------------------------- |  | ----------
|2100 Seaport Blvd. Redwood City, California |  | 94063     
|(Address of principal executive offices)    |  | (Zip Code)

(650) 480-8000

(Registrants telephone number, including area code)

Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x            Accelerated filer ̈Non-accelerated filer ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).

Yes ̈No  x

As of October 31, 2007 there were 83,222,624
shares of the registrants Common Stock outstanding.



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##### Table of Contents

OPENWAVE SYSTEMS INC.

Table of Contents



|                              |  |                                                                                       |  |   
|----------------------------- |  | ------------------------------------------------------------------------------------- |  | --
|PART I. FINANCIAL INFORMATION |  |                                                                                      
|                              |  |                                                                                      
|Item 1.                       |  | Financial Statements:                                                                 |  |   
|                              |  | Condensed Consolidated Balance Sheets                                                 |  | 3 
|                              |  | Condensed Consolidated Statements of Operations                                       |  | 4 
|                              |  | Condensed Consolidated Statements of Cash Flows                                       |  | 5 
|                              |  | Notes to Condensed Consolidated Financial Statements                                  |  | 6 
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 22
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 32
|Item 4.                       |  | Controls and Procedures                                                               |  | 33
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                      
|                              |  |                                                                                      
|Item 1.                       |  | Legal Proceedings                                                                     |  | 35
|Item 1A.                      |  | Risk Factors                                                                          |  | 37
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 37
|Item 3.                       |  | Defaults Upon Senior Securities                                                       |  | 37
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                   |  | 37
|Item 5.                       |  | Other Information                                                                     |  | 37
|Item 6.                       |  | Exhibits                                                                              |  | 38
|                              | 
|SIGNATURES                    |  | 39                                                                                   



2



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##### Table of Contents

PART 1. FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

OPENWAVE SYSTEMS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)



|                                                          |  |                   |            |   |              |   |            |  
|--------------------------------------------------------- |  | ----------------- | ---------- | - | ------------ | - | ---------- | -
|                                                          |  | September 30,2007 |            |   | June 30,2007 |  
|Assets                                                    |  |                   |            |   |              |   |            |  
|Current Assets:                                           |  |                   |            |   |              |   |            |  
|Cash and cash equivalents                                 |  | $                 | 127,378    |   |              | $ | 80,581     |  
|Short-term investments                                    |  |                   | 77,512     |   |              |   | 160,063    |  
|Restricted cash                                           |  |                   | 962        |   |              |   | 2,061      |  
|Accounts receivable, net                                  |  |                   | 56,273     |   |              |   | 72,894     |  
|Prepaid expenses and other current assets                 |  |                   | 31,910     |   |              |   | 30,482     |  
|Current assets of discontinued operations                 |  |                   | 16,640     |   |              |   | 19,039     |  
|                                                          |  |                   |            |   |              |   |            |  
|Total current assets                                      |  |                   | 310,675    |   |              |   | 365,120    |  
|                                                          |  |                   |            |   |              |   |            |  
|Property and equipment, net                               |  |                   | 18,407     |   |              |   | 19,834     |  
|Long-term investments and restricted cash and investments |  |                   | 64,059     |   |              |   | 37,944     |  
|Deposits and other assets                                 |  |                   | 4,255      |   |              |   | 4,575      |  
|Goodwill                                                  |  |                   | 67,609     |   |              |   | 65,560     |  
|Intangible assets, net                                    |  |                   | 17,834     |   |              |   | 20,602     |  
|Noncurrent assets of discontinued operations              |  |                   | 34,841     |   |              |   | 34,652     |  
|                                                          |  |                   |            |   |              |   |            |  
|Total assets                                              |  | $                 | 517,680    |   |              | $ | 548,287    |  
|                                                          |  |                   |            |   |              |   |            |  
|Liabilities and Stockholders Equity                      |  |                   |            |   |              |   |            |  
|Current Liabilities:                                      |  |                   |            |   |              |   |            |  
|Accounts payable                                          |  | $                 | 2,949      |   |              | $ | 10,288     |  
|Accrued liabilities                                       |  |                   | 54,760     |   |              |   | 56,344     |  
|Accrued restructuring costs                               |  |                   | 15,188     |   |              |   | 26,118     |  
|Deferred revenue                                          |  |                   | 44,704     |   |              |   | 46,342     |  
|Convertible subordinated notes, net                       |  |                   | 149,223    |   |              |   |           |  
|Current liabilities of discontinued operations            |  |                   | 16,570     |   |              |   | 18,837     |  
|                                                          |  |                   |            |   |              |   |            |  
|Total current liabilities                                 |  |                   | 283,394    |   |              |   | 157,929    |  
|                                                          |  |                   |            |   |              |   |            |  
|Accrued restructuring costs, net of current portion       |  |                   | 48,818     |   |              |   | 51,140     |  
|Deferred revenue, net of current portion                  |  |                   | 17,570     |   |              |   | 11,917     |  
|Deferred rent obligations                                 |  |                   | 1,897      |   |              |   | 1,649      |  
|Long term taxes payable                                   |  |                   | 2,319      |   |              |   |           |  
|Deferred tax liabilities, net of current portion          |  |                   | 626        |   |              |   | 1,349      |  
|Convertible subordinated notes, net                       |  |                   |           |   |              |   | 149,017    |  
|Noncurrent liabilities of discontinued operations         |  |                   | 5,142      |   |              |   | 5,034      |  
|                                                          |  |                   |            |   |              |   |            |  
|Total liabilities                                         |  |                   | 359,766    |   |              |   | 378,035    |  
|                                                          |  |                   |            |   |              |   |            |  
|Commitments and contingencies                             |  |                   |            |   |              |   |            |  
|Stockholders equity:                                     |  |                   |            |   |              |   |            |  
|Common stock                                              |  |                   | 83         |   |              |   | 83         |  
|Additional paid-in capital                                |  |                   | 3,173,579  |   |              |   | 3,171,534  |  
|Accumulated other comprehensive income                    |  |                   | 2,432      |   |              |   | 2,485      |  
|Accumulated deficit                                       |  |                   | (3,018,180 | ) |              |   | (3,003,850 | )
|                                                          |  |                   |            |   |              |   |            |  
|Total stockholders equity                                |  |                   | 157,914    |   |              |   | 170,252    |  
|                                                          |  |                   |            |   |              |   |            |  
|Total liabilities and stockholders equity                |  | $                 | 517,680    |   |              | $ | 548,287    |  
|                                                          |  |                   |            |   |              |   |            |  

See accompanying notes to condensed consolidated financial statements



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OPENWAVE SYSTEMS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)



|                                                                  |  |                                  |         |   |      |   |         |  
|----------------------------------------------------------------- |  | -------------------------------- | ------- | - | ---- | - | ------- | -
|                                                                  |  | Three Months Ended September 30, |        
|                                                                  |  | 2007                             |         |   | 2006 |  
|Revenues:                                                         |  |                                  |         |   |      |   |         |  
|License                                                           |  | $                                | 17,323  |   |      | $ | 29,570  |  
|Maintenance and support                                           |  |                                  | 21,644  |   |      |   | 22,813  |  
|Services                                                          |  |                                  | 24,005  |   |      |   | 31,428  |  
|                                                                  |  |                                  |         |   |      |   |         |  
|Total revenues                                                    |  |                                  | 62,972  |   |      |   | 83,811  |  
|                                                                  |  |                                  |         |   |      |   |         |  
|Cost of revenues:                                                 |  |                                  |         |   |      |   |         |  
|License                                                           |  |                                  | 2,879   |   |      |   | 3,302   |  
|Maintenance and support                                           |  |                                  | 8,320   |   |      |   | 7,829   |  
|Services                                                          |  |                                  | 18,100  |   |      |   | 22,374  |  
|                                                                  |  |                                  |         |   |      |   |         |  
|Total cost of revenues                                            |  |                                  | 29,299  |   |      |   | 33,505  |  
|                                                                  |  |                                  |         |   |      |   |         |  
|Gross profit                                                      |  |                                  | 33,673  |   |      |   | 50,306  |  
|                                                                  |  |                                  |         |   |      |   |         |  
|Operating expenses:                                               |  |                                  |         |   |      |   |         |  
|Research and development                                          |  |                                  | 15,042  |   |      |   | 18,258  |  
|Sales and marketing                                               |  |                                  | 18,533  |   |      |   | 25,051  |  
|General and administrative                                        |  |                                  | 13,920  |   |      |   | 15,470  |  
|Stock option review and related costs                             |  |                                  |        |   |      |   | 5,492   |  
|Restructuring and other related costs                             |  |                                  | 1,208   |   |      |   | 10,500  |  
|Amortization of intangible assets                                 |  |                                  | 714     |   |      |   | 714     |  
|Gain on sale of technology and other                              |  |                                  |        |   |      |   | (1,287  | )
|                                                                  |  |                                  |         |   |      |   |         |  
|Total operating expenses                                          |  |                                  | 49,417  |   |      |   | 74,198  |  
|                                                                  |  |                                  |         |   |      |   |         |  
|Operating loss from continuing operations                         |  |                                  | (15,744 | ) |      |   | (23,892 | )
|Interest income                                                   |  |                                  | 3,320   |   |      |   | 6,304   |  
|Interest expense                                                  |  |                                  | (1,213  | ) |      |   | (1,255  | )
|Other income (expense), net                                       |  |                                  | 797     |   |      |   | 849     |  
|                                                                  |  |                                  |         |   |      |   |         |  
|Loss from continuing operations before provision for income taxes |  |                                  | (12,840 | ) |      |   | (17,994 | )
|Income tax expense                                                |  |                                  | 954     |   |      |   | 2,071   |  
|                                                                  |  |                                  |         |   |      |   |         |  
|Net loss from continuing operations                               |  |                                  | (13,794 | ) |      |   | (20,065 | )
|                                                                  |  |                                  |         |   |      |   |         |  
|Discontinued operations:                                          |  |                                  |         |   |      |   |         |  
|Net loss from discontinued operations, net of tax                 |  |                                  | (351    | ) |      |   | (4,472  | )
|                                                                  |  |                                  |         |   |      |   |         |  
|Net loss                                                          |  | $                                | (14,145 | ) |      | $ | (24,537 | )
|                                                                  |  |                                  |         |   |      |   |         |  
|Basic and Diluted net loss per share from:                        |  |                                  |         |   |      |   |         |  
|Continuing operations                                             |  | $                                | (0.17   | ) |      | $ | (0.22   | )
|Discontinued operations                                           |  | $                                | (0.00   | ) |      | $ | (0.05   | )
|                                                                  |  |                                  |         |   |      |   |         |  
|Net loss                                                          |  | $                                | (0.17   | ) |      | $ | (0.27   | )
|                                                                  |  |                                  |         |   |      |   |         |  
|Shares used in computing basic and diluted net loss per share     |  |                                  | 82,224  |   |      |   | 91,815  |  

See accompanying notes to condensed consolidated financial statements



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OPENWAVE SYSTEMS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



|                                                                                               |  |                                 |         |   |      |   |         |  
|---------------------------------------------------------------------------------------------- |  | ------------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                               |  | Three Months EndedSeptember 30, |        
|                                                                                               |  | 2007                            |         |   | 2006 |  
|Cash flows from operating activities:                                                          |  |                                 |         |   |      |   |         |  
|Net loss                                                                                       |  | $                               | (14,145 | ) |      | $ | (24,537 | )
|Adjustments to reconcile net loss to net cash used for operating activities:                   |  |                                 |         |   |      |   |         |  
|Depreciation and amortization of intangibles                                                   |  |                                 | 5,211   |   |      |   | 6,902   |  
|Stock-based compensation                                                                       |  |                                 | 2,489   |   |      |   | 6,818   |  
|Noncash restructuring charges                                                                  |  |                                 | 532     |   |      |   | 1,360   |  
|Provision for (recovery of) doubtful accounts                                                  |  |                                 | (773    | ) |      |   |        |  
|Amortization of discount on convertible debt and debt issuance costs                           |  |                                 | 206     |   |      |   | 254     |  
|Amortization/(accretion) of premiums/discounts on investments                                  |  |                                 | (259    | ) |      |   | (439    | )
|Loss on disposal of property and equipment                                                     |  |                                 |        |   |      |   | 6       |  
|Deferred tax liability, net                                                                    |  |                                 | (745    | ) |      |   | (2,608  | )
|Gain on sale of technology and other                                                           |  |                                 |        |   |      |   | (1,287  | )
|Changes in operating assets and liabilities, net of effect of acquired assets and liabilities: |  |                                 |         |   |      |   |         |  
|Accounts receivable                                                                            |  |                                 | 18,320  |   |      |   | (523    | )
|Prepaid assets, deposits, and other assets                                                     |  |                                 | (2,831  | ) |      |   | (4,861  | )
|Accounts payable                                                                               |  |                                 | (8,473  | ) |      |   | 1,487   |  
|Accrued liabilities                                                                            |  |                                 | 115     |   |      |   | 12,774  |  
|Accrued restructuring costs                                                                    |  |                                 | (13,784 | ) |      |   | 2,187   |  
|Deferred revenue                                                                               |  |                                 | 3,691   |   |      |   | (3,496  | )
|                                                                                               |  |                                 |         |   |      |   |         |  
|Net cash used for operating activities                                                         |  |                                 | (10,446 | ) |      |   | (5,963  | )
|                                                                                               |  |                                 |         |   |      |   |         |  
|Cash flows from investing activities:                                                          |  |                                 |         |   |      |   |         |  
|Purchases of property and equipment                                                            |  |                                 | (1,917  | ) |      |   | (4,655  | )
|Net proceeds from sale of technology and other                                                 |  |                                 | 1,065   |   |      |   | 1,287   |  
|Purchases of short-term investments                                                            |  |                                 | (21,772 | ) |      |   | (43,644 | )
|Proceeds from sales and maturities of short-term investments                                   |  |                                 | 82,685  |   |      |   | 55,069  |  
|Purchases of long-term investments                                                             |  |                                 | (5,226  | ) |      |   | (30,663 | )
|Proceeds from sales and maturities of long-term investments                                    |  |                                 | 983     |   |      |   | 1,680   |  
|Restricted cash and investments                                                                |  |                                 | (195    | ) |      |   | 2,045   |  
|                                                                                               |  |                                 |         |   |      |   |         |  
|Net cash provided by (used for) investing activities                                           |  |                                 | 55,623  |   |      |   | (18,881 | )
|                                                                                               |  |                                 |         |   |      |   |         |  
|Cash flows from financing activities:                                                          |  |                                 |         |   |      |   |         |  
|Proceeds from issuance of common stock, net                                                    |  |                                 | 58      |   |      |   | 138     |  
|Cash used to repurchase common stock from employees                                            |  |                                 | (505    | ) |      |   | (113    | )
|                                                                                               |  |                                 |         |   |      |   |         |  
|Net cash provided by (used for) financing activities                                           |  |                                 | (447    | ) |      |   | 25      |  
|                                                                                               |  |                                 |         |   |      |   |         |  
|Effect of exchange rates on cash and cash equivalents                                          |  |                                 |        |   |      |   | 21      |  
|                                                                                               |  |                                 |         |   |      |   |         |  
|Net increase (decrease) in cash and cash equivalents                                           |  |                                 | 44,730  |   |      |   | (24,798 | )
|Cash and cash equivalents at beginning of period                                               |  |                                 | 86,099  |   |      |   | 172,546 |  
|                                                                                               |  |                                 |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                                     |  | $                               | 130,829 |   |      | $ | 147,748 |  
|                                                                                               |  |                                 |         |   |      |   |         |  
|Cash and cash equivalents included in discontinued operations                                  |  | $                               | 3,451   |   |      | $ | 3,870   |  
|                                                                                               |  |                                 |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                                     |  | $                               | 127,378 |   |      | $ | 143,878 |  
|                                                                                               |  |                                 |         |   |      |   |         |  
|Supplemental disclosures of cash flow information:                                             |  |                                 |         |   |      |   |         |  
|Cash flows from discontinued operations:                                                       |  |                                 |         |   |      |   |         |  
|Net cash used in operating activities                                                          |  | $                               | (4,308  | ) |      | $ | (645    | )
|Net cash used in investing activities                                                          |  |                                 | (124    | ) |      |   | (750    | )
|Net cash provided by financing activities                                                      |  |                                 | 2,365   |   |      |   | 702     |  
|Effect of exchange rate on cash and cash equivalents                                           |  |                                 |        |   |      |   | 21      |  
|                                                                                               |  |                                 |         |   |      |   |         |  
|Net cash used in discontinued operations                                                       |  |                                 | (2,067  | ) |      |   | (672    | )
|                                                                                               |  |                                 |         |   |      |   |         |  
|Cash paid for income taxes                                                                     |  | $                               | 495     |   |      | $ | 2,528   |  
|                                                                                               |  |                                 |         |   |      |   |         |  
|Cash paid for interest                                                                         |  | $                               | 2,245   |   |      | $ | 2,318   |  
|                                                                                               |  |                                 |         |   |      |   |         |  
|Noncash investing and financing activities:                                                    |  |                                 |         |   |      |   |         |  
|Transfers among short-term and long-term investments                                           |  | $                               | 21,936  |   |      | $ | 15,500  |  
|                                                                                               |  |                                 |         |   |      |   |         |  

See accompanying notes to condensed consolidated financial statements



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OPENWAVE SYSTEMS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

(1) Summary of Significant Accounting Policies

Basis of
Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not contain all of the information
and notes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management (Management) of Openwave Systems Inc. (the Company or
Openwave), the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the Companys financial position as
of September 30, 2007 and June 30, 2007, and the results of operations for the three months ended September 30, 2007 and 2006 and cash flows for the three months ended September 30, 2007 and 2006. The following information should
be read in conjunction with the audited consolidated financial statements and accompanying notes thereto included in the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2007.

On June 3, 2007, the board of directors approved the disposition of the Musiwave S.A. (Musiwave) business. The Company accounted for the planned sale of
Musiwave as a discontinued operation in accordance with Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 144 (SFAS 144), Accounting for the
Impairment or Disposal of Long Lived Assets. Accordingly, the consolidated financial statements have been revised for all periods presented to reflect Musiwave as a discontinued operation. Unless noted otherwise, discussions in the notes
to the unaudited condensed consolidated financial statements pertain to continuing operations.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with the accounting principles generally accepted in the United States of America requires
Management to make estimates and assumptions that affect the reported amounts in our condensed consolidated financial statements and the accompanying notes. Actual results could differ significantly from those estimates.

Reclassifications

Amounts relating to accretion of discounts,
net of amortization of premiums, on available for sale securities have been reclassified between Net cash used for operating activities and Net cash used for investing activities for the three months ended September 30, 2006 on the condensed
consolidated statement of cash flows to correct an error. The impact was to increase Net cash used for operating activities by $0.4 million and to decrease Net cash used for investing activities by $0.4 million. In addition, $2.9 million and $3.3
million of accrued interest receivable previously reflected as Cash and cash equivalents as of June 30, 2006 and September 30, 2006, respectively, has been included in Prepaid and other current assets on the condensed consolidated balance
sheets and statements of cash flows. The impact of these two reclassifications increased Net cash used for operating activities by $0.8 million.

Revenue Recognition

There have been no material changes to the Companys revenue recognition policy from the information
provided in Note 2 to the consolidated financial statements included in the Companys Annual Report on Form 10K for the year ended June 30, 2007.

Stock Based Compensation

The Company accounts for its stock options under the Financial Accounting Standards Boards
(FASB) Statement of Financial Accounting Standards (FAS) No. 123R, Share-Based Payment, (FAS 123R) for all share based payments and awards granted.



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The following table illustrates stock-based compensation recognized in the consolidated statements of operations by
category of award (in thousands):



|                                                                                 |  |                                 |        |      |   |       
|-------------------------------------------------------------------------------- |  | ------------------------------- | ------ | ---- | - | ------
|                                                                                 |  | Three Months EndedSeptember 30,
|                                                                                 |  | 2007                            |        | 2006
|Stock-based compensation related to:                                             |  |                                 |        |      |   |       
|Grants of nonvested stock                                                        |  | $                               | 231    |      | $ | 1,185 
|Stock options granted to employees and directors                                 |  |                                 | 1,855  |      |   | 4,360 
|Employee stock purchase plan                                                     |  |                                 | 258    |      |   |      
|Stock options granted to employees of discontinued operations                    |  |                                 | 145    |      |   | 161   
|Awards accelerated in relation to restructuring                                  |  |                                 |       |      |   | 1,112 
|                                                                                 |  |                                 |        |      |   |       
|Stock-based compensation recognized in the consolidated statements of operations |  |                                 | $2,489 |      |   | $6,818
|                                                                                 |  |                                 |        |      |   |       

During the three months ended September 30, 2007 and 2006, the Company recorded a $4,000 and $0.2 million tax
benefit related to stock option expense recognized during the respective periods.

During the quarter ended September 30, 2007, the Company
accelerated the vesting of 4,723 shares of restricted stock held by the former CFO of the Company. As a result of that modification, the Company recorded approximately $27,000 dollars in stock-based compensation expense, which represents the value
of the modified grant. Additionally, the Company, reversed previously recognized stock-based compensation expense of approximately $40,000 dollars related to the award as the service condition of the original award was not expected to be satisfied.

The Company elected to amortize stock-based compensation for awards granted on or after the adoption of FAS 123R on July 1, 2005 on a straight-line
basis over the requisite service (vesting) period for the entire award. For awards granted prior to July 1, 2005, compensation costs are amortized in a manner consistent with Financial Accounting Standards Board Interpretation (FIN)
No. 28, Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans. This is the same manner applied in the pro forma disclosures under FAS 123, Accounting for Stock-Based
Compensation, (FAS 123) for periods prior to the adoption of FAS 123R.

(a) Assumptions and Activity

The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model that uses the assumptions
noted in the following table. The Companys expected volatility is based upon the historical volatility experienced in the Companys stock price, as well as implied volatility in the market traded options on Openwave common stock. Prior to
July 1, 2007, the Company derived the expected term from the midpoint between vesting and the contractual term, as described in the SECs Staff Accounting Bulletin No. 107, Share-Based Payment. As of July 1, 2007, the
Company estimates the expected term for new grants based upon historical data, which uses the actual post-vesting option exercise experience, as well as the average midpoint between vesting and the contractual term for outstanding options. The
risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.



|                         |  |                                 |   |  |             |  
|------------------------ |  | ------------------------------- | - |  | ----------- | -
|                         |  | Three Months EndedSeptember 30, |  
|                         |  | 2007                            |   |  | 2006        |  
|Expected volatility      |  | 60.7                            | % |  | 89.1        | %
|Expected dividends       |  | 0                               | % |  | 0           | %
|Expected term (in years) |  | 2.79 - 6.04                     |   |  | 5.75 - 6.06 |  
|Risk-free rate           |  | 4.6                             | % |  | 4.9         | %

The Company determines the fair value of nonvested shares based on the NASDAQ closing stock price on the date of
grant.



7



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##### Table of Contents

A summary of option activity from July 1, 2007 to September 30, 2007 is presented below (in thousands except
per share amounts):



|                                                  |  |        |   |  |                              |       |                                                 |      |                         |   |    
|------------------------------------------------- |  | ------ | - |  | ---------------------------- | ----- | ----------------------------------------------- | ---- | ----------------------- | - | ---
|Options                                           |  | Shares |   |  | WeightedAverageExercisePrice |       | WeightedAverageRemainingContractualTerm (years) |      | AggregateIntrinsicValue
|Outstanding at July 1, 2007                       |  | 8,472  |   |  | $                            | 13.67 |                                                 | 4.86 |                         | $ | 869
|Options granted                                   |  | 1,881  |   |  |                              | 4.45  |                                                 |      |                         |   |    
|Exercised                                         |  | (21    | ) |  |                              | 2.72  |                                                 |      |                         |   |    
|Forfeited, canceled or expired                    |  | (2,101 | ) |  |                              | 14.14 |                                                 |      |                         |   |    
|                                                  |  |        |   |  |                              |       |                                                 |      |                         |   |    
|Outstanding at September 30, 2007                 |  | 8,231  |   |  | $                            | 11.47 |                                                 | 6.66 |                         | $ | 486
|                                                  |  |        |   |  |                              |       |                                                 |      |                         |   |    
|Vested and expected to vest at September 30, 2007 |  | 6,884  |   |  | $                            | 12.14 |                                                 | 5.62 |                         | $ | 443
|                                                  |  |        |   |  |                              |       |                                                 |      |                         |   |    
|Exercisable at September 30, 2007                 |  | 4,784  |   |  | $                            | 14.31 |                                                 | 4.54 |                         | $ | 355
|                                                  |  |        |   |  |                              |       |                                                 |      |                         |   |    

The weighted average grant date fair values of options granted during the three months ended September 30,
2007 and 2006 were $2.10 and $6.28, respectively. The total intrinsic value of options exercised during the three months ended September 30, 2007 and 2006 were $0.1 million and $0.2 million, respectively. Upon the exercise of options, the
Company issues new common stock from its authorized shares.

A summary of the activity of the Companys nonvested shares from July 1, 2007 to
September 30, 2007 is presented below (in thousands except per share amounts):



|                                |  |        |   |  |                                              |      
|------------------------------- |  | ------ | - |  | -------------------------------------------- | -----
|Nonvested Shares                |  | Shares |   |  | WeightedAverageGrant DateFair ValuePer Share
|Nonvested at July 1, 2007       |  | 561    |   |  | $                                            | 10.42
|Nonvested shares granted        |  | 545    |   |  |                                              | 4.50 
|Vested                          |  | (56    | ) |  |                                              | 12.33
|Forfeited                       |  | (120   | ) |  |                                              | 14.02
|                                |  |        |   |  |                                              |      
|Nonvested at September 30, 2007 |  | 930    |   |  | $                                            | 6.23 
|                                |  |        |   |  |                                              |      

As of September 30, 2007, there was $5.9 million of total unrecognized compensation cost related to nonvested
share-based compensation arrangements. That cost is expected to be recognized on a declining basis over the next 4 years. The total fair value of shares vested during the three months ended September 30, 2007 and 2006 was $0.7 million and $0.5
million, respectively.

The impact on our results of operations of recording stock-based compensation for the three month periods ended September 30,
2007 and 2006 was as follows (in thousands):



|                                      |  |                                 |       |      |   |      
|------------------------------------- |  | ------------------------------- | ----- | ---- | - | -----
|                                      |  | Three Months EndedSeptember 30,
|                                      |  | 2007                            |       | 2006
|Stock-based compensation by category: |  |                                 |       |      |   |      
|Maintenance and support services      |  | $                               | 200   |      | $ | 182  
|Services                              |  |                                 | 300   |      |   | 283  
|Research and development              |  |                                 | 380   |      |   | 574  
|Sales and marketing                   |  |                                 | 807   |      |   | 2,528
|General and administrative            |  |                                 | 657   |      |   | 1,978
|Discontinued operations               |  |                                 | 145   |      |   | 161  
|Restructuring and other related costs |  |                                 |      |      |   | 1,112
|                                      |  |                                 |       |      |   |      
|                                      |  | $                               | 2,489 |      | $ | 6,818
|                                      |  |                                 |       |      |   |      



8



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##### Table of Contents

(b) Reinstatement of Employee Stock Purchase Plan

In January 2007, the Company reinstated and amended the Openwave Systems Inc. 1999 Employee Stock Purchase Plan (ESPP) which was suspended in October 2002.
The ESPP is intended to qualify under Section 423 of the Internal Revenue Code and contains one six-month purchase and offering period. Eligible employees may purchase common stock through payroll deductions of up to 20% of compensation. The
price of common stock purchased under the ESPP is the lower of 85% of the fair market value of the Companys common stock at the beginning of the offering period and the end of each purchase period. The amount of stock-based compensation
expense recognized during the first quarter of fiscal 2008 was $0.3 million.

The fair value used in recording the stock-based compensation expense
associated with the ESPP is estimated for each offering period using the Black-Scholes-Merton option pricing model that uses the assumptions noted in the following table. Expected volatilities are based on the historical volatility experienced in
the Companys stock price, as well as implied volatility in the market traded options on Openwave common stock. The expected term is six months, coinciding with the offering period. The risk-free rate for the expected term of the option is
based on the U.S. Treasury yield curve in effect at the time of grant.



|                         |  |                                      |  
|------------------------ |  | ------------------------------------ | -
|                         |  | Three Months EndedSeptember 30, 2007 |  
|Expected volatility      |  | 43.8                                 | %
|Expected dividends       |  | 0                                    | %
|Expected term (in years) |  | 0.5                                  |  
|Risk-free rate           |  | 4.6                                  | %

Recently Issued Accounting Pronouncements

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), which defines fair value, establishes guidelines for
measuring fair value and expands disclosures regarding fair value measurements. SFAS 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. SFAS 157 is
effective for fiscal years beginning after November 15, 2007. Earlier adoption is permitted, provided the company has not yet issued financial statements, including for interim periods, for that fiscal year. The Company is currently assessing
the impact of SFAS 157 on its consolidated financial position and results of operations.

In February, 2007, the FASB issued Statement No. 159,
The Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159). SFAS 159 permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses
on items for which the fair value option has been elected are reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company does not expect the adoption of SFAS 159 to have a material impact on its
consolidated financial position or results of operations.

(2) Net Income (Loss) Per Share

In accordance with SFAS No. 128, Earnings Per Sharebasic net income (loss) per common share has been computed using the weighted average number
of shares of common stock outstanding during the period, less shares subject to repurchase.



9



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##### Table of Contents

The Company excludes potentially dilutive securities from its diluted net income (loss) per share computation when their
effect would be anti-dilutive to the net income (loss) per share computation. The following table sets forth potential shares of common stock that are not included in the diluted net income (loss) per share calculation because to do so would be
anti-dilutive for the periods indicated below (in thousands):



|                                                                                                                                                                                                     |  |                                 |  |       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- |  | ------
|                                                                                                                                                                                                     |  | Three Months EndedSeptember 30,
|                                                                                                                                                                                                     |  | 2007                            |  | 2006  
|Weighted average effect of potential common stock:                                                                                                                                                   |  |                                 |  |       
|Unvested common stock subject to repurchase                                                                                                                                                          |  | 663                             |  | 1,572 
|Options that would have been included in the computation of dilutive shares outstanding had the Company reported net income, prior to applying
the treasury method                                   |  | 252                             |  | 418   
|Options that were excluded from the computation of dilutive shares outstanding because the total assumed proceeds exceeded the average market
value of the Companys common stock during the quarter |  | 7,111                           |  | 10,183
|Shares resulting from an as-if conversion of the convertible debt                                                                                                                                  |  | 8,154                           |  | 8,154 

(3) Discontinued Operations

During the third quarter of fiscal 2006, the Company acquired Musiwave, S.A. (Musiwave), a leading provider of mobile music entertainment services to operators and media companies primarily in Europe.
During June 2007, the Company committed to a plan to sell its interest in Musiwave. In accordance with SFAS 144, Musiwaves financial results have been classified as discontinued operations in our consolidated financial statements for all
periods presented. The net assets associated with Musiwave are reclassified as held-for-sale for all periods presented.

During the fourth
quarter of fiscal 2007, in accordance with SFAS 144 and SFAS 142, the Company recorded an impairment charge of $7.0 million to intangible assets and $81.0 million to goodwill, respectively, related to a reassessment of the carrying value of
Musiwaves long-lived assets in Impairments of assets of discontinued operations, net of tax in the consolidated results of operations. The Company determined fair values utilizing widely accepted valuation techniques, including discounted cash
flows. The Company based fair values on current expectations for the business in light of the existing business environment and expected sales price. The sales price is an estimate and could be higher or lower once a sales agreement is signed. Any
difference from the estimated and actual sales price would cause a gain or loss on sale in the period a definitive agreement is signed.

The financial
results of Musiwave included in discontinued operations were as follows (in thousands):



|                                                    |  |                                  |       |   |      |   |        |  
|--------------------------------------------------- |  | -------------------------------- | ----- | - | ---- | - | ------ | -
|                                                    |  | Three Months ended September 30, |      
|                                                    |  | 2007                             |       |   | 2006 |  
|Revenue of discontinued operations                  |  | $                                | 7,189 |   |      | $ | 7,640  |  
|                                                    |  |                                  |       |   |      |   |        |  
|Loss from discontinued operations                   |  |                                  | (295  | ) |      |   | (4,719 | )
|Income tax (benefit) expense                        |  |                                  | 56    |   |      |   | (247   | )
|                                                    |  |                                  |       |   |      |   |        |  
|Net loss from discontinued operations, net of taxes |  | $                                | (351  | ) |      | $ | (4,472 | )
|                                                    |  |                                  |       |   |      |   |        |  



10



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##### Table of Contents

The following table presents the carrying amounts of major classes of assets and liabilities relating to discontinued
operations at September 30, 2007 and 2006 (in thousands):



|                                                         |  |                   |        |              |   |       
|-------------------------------------------------------- |  | ----------------- | ------ | ------------ | - | ------
|                                                         |  | September 30,2007 |        | June 30,2007
|Assets:                                                  |  |                   |        |              |   |       
|Cash and cash equivalents                                |  | $                 | 3,451  |              | $ | 5,518 
|Short term investments                                   |  |                   | 343    |              |   | 327   
|Accounts receivable, net                                 |  |                   | 8,829  |              |   | 9,755 
|Prepaid and other current assets                         |  |                   | 4,017  |              |   | 3,439 
|                                                         |  |                   |        |              |   |       
|Total current assets of discontinued operations          |  |                   | 16,640 |              |   | 19,039
|Property and equipment, net                              |  |                   | 1,941  |              |   | 1,833 
|Goodwill                                                 |  |                   | 7,340  |              |   | 7,339 
|Intangibles, net                                         |  |                   | 22,730 |              |   | 22,730
|Deposits and other assets                                |  |                   | 2,830  |              |   | 2,750 
|                                                         |  |                   |        |              |   |       
|Total non-current assets of discontinued operations      |  |                   | 34,841 |              |   | 34,652
|Liabilities:                                             |  |                   |        |              |   |       
|Accounts payable                                         |  |                   | 2,341  |              |   | 4,293 
|Accrued liabilities                                      |  |                   | 13,842 |              |   | 13,725
|Deferred revenue                                         |  |                   | 387    |              |   | 819   
|                                                         |  |                   |        |              |   |       
|Total current liabilities of discontinued operations     |  |                   | 16,570 |              |   | 18,837
|Deferred revenue, net of current portion                 |  |                   | 2,202  |              |   | 2,094 
|Deferred tax liabilities, net of deferred tax assets     |  |                   | 2,940  |              |   | 2,940 
|                                                         |  |                   |        |              |   |       
|Total non-current liabilities of discontinued operations |  |                   | 5,142  |              |   | 5,034 

The cash flows from the discontinued operation, as presented in the consolidated statement of cash flows, relate
to the ongoing operations of Musiwave and are expected to continue until a sale occurs, which is expected in fiscal 2008. Cash flows of the discontinued operation are identified by considering the separate legal entities of Musiwave as well as
certain payments made by Openwave related solely to the discontinued operation such as the Holdback Amount discussed in Note 6 below.

As of
September 30, 2007, the balance of foreign currency translation adjustments associated with Musiwave was $3.3 million and will be eliminated upon a sale of Musiwave. See Note 5 (d) Accumulated Comprehensive Loss below.

(4) Geographic, Segment and Significant Customer Information

The
Companys chief operating decision maker is considered to be the Companys Chief Executive Officer (CEO). The CEO reviews financial information presented on a consolidated basis accompanied by disaggregated information about
revenues by geographic region and by product for purposes of making operating decisions and assessing financial performance.

The Company has organized its
operations based on a single operating segment. The disaggregated revenue information reviewed on a product category basis by the CEO includes: 1) server software and services; and 2) client software and related services.

Server software and services includes, but is not limited to: software which enables end users to exchange electronic mail, and multimedia messages from PCs, wireline
telephones and mobile phones; software that contains the foundation software required to enable Internet connectivity to mobile devices and to build a set of applications for mobile users; our system solutions software and services and third-party
hardware. Server software and services products includes the following: email, IP Voicemail, Messaging Anti-Abuse products and services, other messaging products, Openwave Mobile Access Gateway, Openwave Location Products, Multimedia Messaging
Services (MMS), Openwave Provisioning Manager, and packaged solution elements which include software licenses, professional services, third-party software and hardware.

Client software and related services primarily include the Openwave Mobile Browser, which is a microbrowser that is designed and optimized for wireless devices, Openwave Mobile Messaging Client, and Openwave Phone
Suite.



11



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##### Table of Contents

The disaggregated revenue information reviewed by the CEO is as follows (in thousands):



|                       |  |                                 |        |      |   |       
|---------------------- |  | ------------------------------- | ------ | ---- | - | ------
|                       |  | Three Months EndedSeptember 30,
|                       |  | 2007                            |        | 2006
|Disaggregated revenue: |  |                                 |        |      |   |       
|Server                 |  | $                               | 52,970 |      | $ | 64,116
|Client                 |  |                                 | 10,002 |      |   | 19,695
|                       |  |                                 |        |      |   |       
|Total Revenues         |  | $                               | 62,972 |      | $ | 83,811
|                       |  |                                 |        |      |   |       

The Company markets its products primarily from its operations in the United States. International sales are
primarily to customers in Asia Pacific and Europe, Middle East and Africa (EMEA). Information regarding the Companys revenue in different geographic regions is as follows (in thousands):



|                                      |  |                                 |        |      |   |       
|------------------------------------- |  | ------------------------------- | ------ | ---- | - | ------
|                                      |  | Three Months EndedSeptember 30,
|                                      |  | 2007                            |        | 2006
|United States                         |  | $                               | 27,131 |      | $ | 38,216
|Americas, excluding the United States |  |                                 | 4,540  |      |   | 4,641 
|Europe, Middle East, and Africa       |  |                                 | 15,626 |      |   | 12,800
|Japan                                 |  |                                 | 7,845  |      |   | 10,424
|Asia Pacific, excluding Japan         |  |                                 | 7,830  |      |   | 17,730
|                                      |  |                                 |        |      |   |       
|Total revenues                        |  | $                               | 62,972 |      | $ | 83,811
|                                      |  |                                 |        |      |   |       

The Companys long-lived assets residing in countries other than in the United States are insignificant and
thus have not been disclosed.

Significant customer revenue as a percentage of total revenue for the three months ended September 30, 2007 and 2006
was as follows:



|              |  |                                                   |   |  |      |  
|------------- |  | ------------------------------------------------- | - |  | ---- | -
|              |  | % of Total RevenueThree Months EndedSeptember 30, |  
|              |  | 2007                                              |   |  | 2006 |  
|Customer:     |  |                                                   |   |  |      |  
|Sprint Nextel |  | 21                                                | % |  | 22   | %

(5) Balance Sheet Components

(a) Accounts Receivable, net

The following table presents the components of accounts receivable (in thousands):



|                                |  |                   |        |   |              |   |        |  
|------------------------------- |  | ----------------- | ------ | - | ------------ | - | ------ | -
|                                |  | September 30,2007 |        |   | June 30,2007 |  
|Accounts receivable             |  | $                 | 46,027 |   |              | $ | 60,435 |  
|Unbilled accounts receivable    |  |                   | 14,171 |   |              |   | 16,673 |  
|Allowance for doubtful accounts |  |                   | (3,925 | ) |              |   | (4,214 | )
|                                |  |                   |        |   |              |   |        |  
|                                |  | $                 | 56,273 |   |              | $ | 72,894 |  
|                                |  |                   |        |   |              |   |        |  



12



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##### Table of Contents

Significant customer accounts receivable balances as a percentage of total gross accounts receivable at
September 30, 2007 and June 30, 2007 were as follows:



|              |  |                               |   |  |          |  
|------------- |  | ----------------------------- | - |  | -------- | -
|              |  | % of Total AccountsReceivable |  
|              |  | September 30,                 |   |  | June 30, |  
|              |  | 2007                          |   |  | 2007     |  
|Customer:     |  |                               |   |  |          |  
|Sprint Nextel |  | 14                            | % |  | 19       | %

(b) Long-term Investments

As of September 30, 2007, $22.7 million in certain auction rate securities, recorded in long-term investments on the condensed consolidated balance sheet, were considered illiquid based upon recent auction
results. As such, the fair value of these instruments was estimated at par value by a third party pricing firm that supplies pricing estimates to the Companys investment managers. These instruments are all rated AAA by Standard and Poors
and Aaa by Moodys and $17.0 million of these illiquid investments are insured against defaults of principal and interest by third party insurance companies. If these securities begin trading below par value in the future, the Company may be
required to record losses on these investments if the decline in value is not deemed temporary.

(c) Goodwill and Intangible Assets, net

The following table presents a roll-forward of the goodwill and intangible assets from June 30, 2007 to September 30, 2007 (in thousands):



|                              |  |                            |        |           |   |       |              |  |   |                                 |   |  |   |       
|----------------------------- |  | -------------------------- | ------ | --------- | - | ----- | ------------ |  | - | ------------------------------- | - |  | - | ------
|                              |  | Balance as ofJune 30, 2007 |        | Additions |   |       | Amortization |  |   | Balance as ofSeptember 30, 2007
|Goodwill                      |  | $                          | 65,560 |           | $ | 2,049 | (a)          |  | $ |                                |   |  | $ | 67,609
|Intangibles assets:           |  |                            |        |           |   |       |              |  |   |                                 |   |  |   |       
|Developed and core technology |  |                            | 16,946 |           |   |      |              |  |   | (1,899                          | ) |  |   | 15,047
|Customer contracts - licenses |  |                            | 309    |           |   |      |              |  |   | (137                            | ) |  |   | 172   
|Customer contracts - support  |  |                            | 169    |           |   |      |              |  |   | (18                             | ) |  |   | 151   
|Customer relationships        |  |                            | 3,025  |           |   |      |              |  |   | (687                            | ) |  |   | 2,338 
|Workforce in place            |  |                            | 153    |           |   |      |              |  |   | (27                             | ) |  |   | 126   
|                              |  |                            |        |           |   |       |              |  |   |                                 |   |  |   |       
|                              |  | $                          | 86,162 |           | $ | 2,049 |              |  | $ | (2,768                          | ) |  | $ | 85,443
|                              |  |                            |        |           |   |       |              |  |   |                                 |   |  |   |       



|(a) | Additions to goodwill during the first quarter of fiscal year 2008 relate to the release of escrow funds of $1.25 million for the purchase of Solomio and $0.8 million related to the
WiderWeb Earn Out. For further details see Note 6 below.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Total amortization expense related to intangible assets during the three months
ended September 30, 2007 and 2006 was as follows (in thousands):



|                              |  |                                 |       |      |   |      
|----------------------------- |  | ------------------------------- | ----- | ---- | - | -----
|                              |  | Three Months EndedSeptember 30,
|                              |  | 2007                            |       | 2006
|Developed and core technology |  | $                               | 1,899 |      | $ | 1,491
|Customer contracts - licenses |  |                                 | 137   |      |   | 6    
|Customer contracts - support  |  |                                 | 18    |      |   | 21   
|Customer relationships        |  |                                 | 687   |      |   | 687  
|Workforce in place            |  |                                 | 27    |      |   | 27   
|                              |  |                                 |       |      |   |      
|                              |  | $                               | 2,768 |      | $ | 2,232
|                              |  |                                 |       |      |   |      

Amortization of acquired developed and core technology and customer license contracts is included in Cost of
Revenues  License. Amortization of acquired customer support contracts is included in Cost of Revenue  Maintenance and Support. Amortization of acquired customer relationships and workforce in place is included in Operating expenses.



13



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##### Table of Contents

The following tables set forth the carrying amount of intangible assets, net as of September 30, 2007 and
June 30, 2007 (in thousands):



|                              |  |                     |        |                         |   |         |                   |  |                     |        |                         |   |        |                   |   |         |   |  |   |       
|----------------------------- |  | ------------------- | ------ | ----------------------- | - | ------- | ----------------- |  | ------------------- | ------ | ----------------------- | - | ------ | ----------------- | - | ------- | - |  | - | ------
|                              |  | September 30, 2007  |        | June 30, 2007          
|                              |  | GrossCarryingAmount |        | AccumulatedAmortization |   |         | NetCarryingAmount |  | GrossCarryingAmount |        | AccumulatedAmortization |   |        | NetCarryingAmount
|Developed and core technology |  | $                   | 38,895 |                         | $ | (23,848 | )                 |  | $                   | 15,047 |                         | $ | 38,895 |                   | $ | (21,949 | ) |  | $ | 16,946
|Customer contracts - licenses |  |                     | 4,992  |                         |   | (4,820  | )                 |  |                     | 172    |                         |   | 4,992  |                   |   | (4,683  | ) |  |   | 309   
|Customer contracts - support  |  |                     | 417    |                         |   | (266    | )                 |  |                     | 151    |                         |   | 417    |                   |   | (248    | ) |  |   | 169   
|Cusomer relationships         |  |                     | 11,802 |                         |   | (9,464  | )                 |  |                     | 2,338  |                         |   | 11,802 |                   |   | (8,777  | ) |  |   | 3,025 
|Workforce in place            |  |                     | 414    |                         |   | (288    | )                 |  |                     | 126    |                         |   | 414    |                   |   | (261    | ) |  |   | 153   
|                              |  |                     |        |                         |   |         |                   |  |                     |        |                         |   |        |                   |   |         |   |  |   |       
|                              |  | $                   | 56,520 |                         | $ | (38,686 | )                 |  | $                   | 17,834 |                         | $ | 56,520 |                   | $ | (35,918 | ) |  | $ | 20,602
|                              |  |                     |        |                         |   |         |                   |  |                     |        |                         |   |        |                   |   |         |   |  |   |       

The following table presents the estimated future amortization of intangible assets, based upon the intangible
assets recorded as of September 30, 2007, (in thousands):



|                 |  |              |       
|---------------- |  | ------------ | ------
|Fiscal Year      |  | Amortization
|2008 (remaining) |  | $            | 7,963 
|2009             |  |              | 6,010 
|2010             |  |              | 1,680 
|2011             |  |              | 1,620 
|2012             |  |              | 561   
|                 |  |              |       
|                 |  | $            | 17,834
|                 |  |              |       

(d) Deferred Revenue

As of September 30, 2007 and June 30, 2007, the Company had deferred revenue of $62.3 million and $58.3 million, respectively, consisting of deferred license fees, new version coverage, maintenance and
support fees, and professional services fees. Deferred revenue results from amounts billed to the customer but not yet recognized as revenue as of the balance sheet date since the billing related to one or more of the following:



| |  |  | amounts billed prior to acceptance of product or service;
| | - |  | ---------------------------------------------------------



| |  |  | new version coverage and/or maintenance and support elements prior to the time service is delivered;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | subscriber licenses committed in excess of subscribers activated for arrangements being recognized on a subscriber activation basis; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | license arrangements amortized over a specified future period due to the provision of unspecified future products.
| | - |  | ------------------------------------------------------------------------------------------------------------------

Amounts in accounts receivable that have corresponding balances included in deferred revenue aggregated to approximately $14.1 million and $20.4 million as of
September 30, 2007 and June 30, 2007, respectively.

(e) Accumulated Other Comprehensive Income ( Loss)

The components of accumulated other comprehensive income (loss) were as follows (in thousands):



|                                         |  |                   |       |              |   |      
|---------------------------------------- |  | ----------------- | ----- | ------------ | - | -----
|                                         |  | September 30,2007 |       | June 30,2007
|Unrealized loss on marketable securities |  | $                 | (120) |              | $ | (67) 
|Cumulative translation adjustments       |  |                   | 2,552 |              |   | 2,552
|                                         |  |                   |       |              |   |      
|Accumulated other comprehensive income   |  | $                 | 2,432 |              | $ | 2,485
|                                         |  |                   |       |              |   |      



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Comprehensive income (loss) is comprised of net income (loss), changes in unrealized gain (loss) on marketable
securities, and changes in accumulated foreign currency translation adjustments (in thousands):



|                                                               |  |                                 |         |   |      |   |         |  
|-------------------------------------------------------------- |  | ------------------------------- | ------- | - | ---- | - | ------- | -
|                                                               |  | Three Months EndedSeptember 30, |        
|                                                               |  | 2007                            |         |   | 2006 |  
|Net loss                                                       |  | $                               | (14,145 | ) |      | $ | (24,537 | )
|Other comprehensive income:                                    |  |                                 |         |   |      |   |         |  
|Change in unrealized gain (loss) on marketable securities      |  |                                 | 53      |   |      |   | 584     |  
|Change in accumulated foreign currency translation adjustments |  |                                 |        |   |      |   | 21      |  
|                                                               |  |                                 |         |   |      |   |         |  
|Total comprehensive loss                                       |  | $                               | (14,092 | ) |      | $ | (23,932 | )
|                                                               |  |                                 |         |   |      |   |         |  

(6) Acquisitions

Acquisition of WiderWeb

On February 9, 2007, the Company acquired all of the outstanding issued share capital of WiderWeb
Limited (WiderWeb), a developer of mobile web access solutions, for initial aggregate consideration of approximately $3.6 million (the Initial Consideration). The Initial Consideration consists of the payment of cash
consideration of $3.3 million and transaction costs of $0.3 million, consisting primarily of professional fees.

In addition to the Initial Consideration,
Openwave may pay contingent consideration relating to a retention agreement (Retention Amount). The maximum amount potentially payable for the Retention Amount is $875,000 for the retention of certain key employees of WiderWeb for a
two-year period beginning February 9, 2007. The Retention Amount is being amortized over the two-year period as compensation expense.

Openwave may
also pay contingent consideration (WiderWeb Earn Out) of up to an additional $4.0 million. The actual amount, if any, will be determined based upon the achievement of revenue-related targets by the WiderWeb product line over various
periods between closing and February 8, 2009. During the first quarter of fiscal year 2008, approximately $0.8 million of the WiderWeb Earn Out was achieved. A total of $1.0 million of the WiderWeb Earn Out has been achieved as of
September 30, 2007 and was charged to goodwill on the consolidated balance sheet at the time the contingency was resolved. The remaining potential WiderWeb Earn Out pursuant to the merger agreement is $3.0 million as of September 30, 2007.

The Initial Consideration also does not include $875,000 held back for potential indemnification claims. If there are no qualifying claims made, one half
of the $875,000 is payable in one year following the acquisition and the other half is payable in 15 months following the acquisition. Such payments will be charged to goodwill on the consolidated balance sheet at the time of payment.



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The Initial Consideration has been allocated as follows (in thousands):



|                                         |  |   |       |  
|---------------------------------------- |  | - | ----- | -
|Tangible assets:                         |  |   |       |  
|Cash and cash equivalents                |  | $ | 15    |  
|Accounts receivable                      |  |   | 176   |  
|Property, plant and equipment            |  |   | 15    |  
|                                         |  |   |       |  
|Total tangible assets                    |  |   | 206   |  
|                                         |  |   |       |  
|Intangible assets:                       |  |   |       |  
|Identifiable intangibles                 |  |   | 2,190 |  
|Goodwill                                 |  |   | 2,032 |  
|                                         |  |   |       |  
|Total intangible assets                  |  |   | 4,222 |  
|                                         |  |   |       |  
|Liabilities assumed:                     |  |   |       |  
|Accounts payable and accrued liabilities |  |   | (95   | )
|Deferred tax liability                   |  |   | (657  | )
|Deferred revenue                         |  |   | (103  | )
|                                         |  |   |       |  
|Total liabilities assumed                |  |   | (855  | )
|                                         |  |   |       |  
|Net assets acquired                      |  | $ | 3,573 |  
|                                         |  |   |       |  

Acquisition of SoloMio

On October 2, 2006, the Company acquired all of the outstanding issued share capital of SoloMio Corporation (SoloMio), for initial aggregate consideration of approximately $9.8 million (the
Initial Consideration). The Initial Consideration consists of the payment of cash consideration of $9.5 million and transaction costs of $0.3 million, consisting primarily of professional fees.

During the quarter ended September 30, 2007, amounts held in an escrow account for indemnification claims were released. Upon this release, $1.25 million previously
recorded as restricted cash were reclassified to goodwill on the consolidated balance sheet.

Pursuant to the terms of the merger agreement, in addition to
the original consideration paid for the purchase, we may pay contingent consideration (SoloMio Earn Out) of up to an additional $5.5 million. The actual amount of the SoloMio Earn Out payments, if any, will be determined based upon the
achievement of revenue-related targets by the SoloMio product line over various periods between closing and December 31, 2007. No earn-out payments were made through September 30, 2007. During October 2007, the Company paid $0.8 million to the
former shareholders of SoloMio. The majority of the $0.8 million will be reflected as an increase to goodwill and the portion paid to employees will be recorded as operating expense in the quarter ending December 31, 2007. The remaining
potential SoloMio Earn Out pursuant to the merger agreement is $1.1 million, all of which may be earned during the fiscal quarter ended December 31, 2007.



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The Initial Consideration has been allocated as follows (in thousands):



|                                         |  |   |        |  
|---------------------------------------- |  | - | ------ | -
|Tangible assets:                         |  |   |        |  
|Cash and cash equivalents                |  | $ | 1,282  |  
|Accounts receivable                      |  |   | 1,207  |  
|Prepaid and other current assets         |  |   | 200    |  
|Propertly, plant and equipment           |  |   | 48     |  
|                                         |  |   |        |  
|Total tangible assets                    |  |   | 2,737  |  
|Intangible assets:                       |  |   |        |  
|Identifiable intangibles                 |  |   | 6,840  |  
|Goodwill                                 |  |   | 2,904  |  
|                                         |  |   |        |  
|Total intangible assets                  |  |   | 9,744  |  
|Liabilities assumed:                     |  |   |        |  
|Accounts payable and accrued liabilities |  |   | (1,672 | )
|Deferred revenue                         |  |   | (995   | )
|Total liabilities assumed                |  |   | (2,667 | )
|                                         |  |   |        |  
|Net assets acquired                      |  | $ | 9,814  |  
|                                         |  |   |        |  

Acquisition of Musiwave

On January 13, 2006, the Company acquired all of the outstanding issued share capital of Musiwave, a leading provider of mobile music entertainment services to operators and media companies primarily in Europe
for initial aggregate consideration of approximately $116.6 million (the Initial Consideration). As a result of the transaction, Musiwave became a wholly owned subsidiary of Openwave. The Initial Consideration consists of the payment of
cash consideration of $114.2 million and transaction costs of $2.4 million, consisting primarily of professional fees incurred related to attorneys, accountants and valuation advisors, and transfer taxes.

In addition to the Initial Consideration, Openwave paid contingent consideration relating to a retention agreement (Holdback Amount) totaling
2.3 million, or $3.1 million, for retention of certain key employees of Musiwave for an 18 month period beginning January 13, 2006. Twenty seven percent of the Holdback was paid in the first quarter of fiscal 2007 and the remainder
was paid in the first quarter of fiscal 2008. The Holdback Amount was amortized over the 18 month period ended as compensation expense and is reflected in loss from discontinued operations.

Although buyer-specific synergies were anticipated by integrating Musiwave operations into Openwave, the planned integration did not successfully materialize. In June
2007, the Board of Directors approved the disposition of Musiwave. Accordingly, the results of operations and assets and liabilities of Musiwave are being reported as discontinued operations. See Discontinued Operations in Note 3 above.

(7) Convertible Subordinated Notes

On September 9, 2003, the
Company issued $150.0 million of 2 3/4% convertible subordinated notes (the Notes), due September 9, 2008. The Notes were recorded on the Companys consolidated balance sheet net of a $4.1 million discount, which is being
amortized over the term of the Notes using the straight-line method, which approximates the effective interest rate method. Approximately $206,000 of the discount has been amortized during the three months ended September 30, 2007, compared to
approximately $209,000 in the corresponding period of the prior year. The Company has made a policy election to classify the issuance costs as a reduction to the Notes. The Company incurred $900,000 of costs in connection with the issuance of the
Notes, which were deferred and included in Deposits and other assets. The finance costs are being recognized as interest expense over the term of the notes using the straight-line method, which approximates the effective interest rate method.
Approximately $45,000 of debt issuance costs has been amortized during each of the three months ended September 30, 2007 and 2006.

The Notes are
subordinated to all existing and future senior debt and are convertible into shares of the Companys common stock at the option of the holder at a conversion price of $15.927 per share, or approximately 9.4 million shares in aggregate. The
conversion price takes into consideration an adjustment in the conversion price upon a special one-time cash distribution of $1.20 per share which was paid in June 2007 totaling $99.4 million. The Company may redeem some or all of the Notes for cash
at any time on or after September 9, 2006, at a redemption price equal to $1,000 per $1,000 principal amount of Notes to be redeemed, plus accrued and unpaid interest, if any, on such Notes until, but not including, the redemption date, if the
closing price of the



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Companys common stock has exceeded 150% of the conversion price then in effect for at least 20 trading days within a period of 30 consecutive trading
days ending on the trading day before the mailing date of the optional redemption notice. Each holder may require the Company to purchase all or a portion of such holders Notes upon occurrence of specified change in control events.

The Company evaluated the embedded conversion option as though it was a freestanding instrument in accordance with SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activitiesand EITF No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Companys Own Stockand concluded that the embedded
conversion option would not be accounted for separately by the Company. The Company concluded the holders right to demand repurchase of the debt in the event of a change in control does not create an embedded derivative since it does not
create substantial premium or discount on redemption (the Notes are issued at par and the redemption is at par). The Companys option to redeem the Notes for cash after September 9, 2006, based on a contingent event does not create an
embedded derivative, since it is within the control of the Company and there is no substantial premium or discount on redemption. Further, the Company evaluated the terms of the Notes for a beneficial conversion feature in accordance with EITF 98-5,
Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratiosand EITF 00-27, Application of Issue No. 98-5 to Certain Convertible Instrumentsand
concluded there was no beneficial conversion feature at the commitment date based on the allocated value of the Notes.

Interest on the Notes began
accruing in September 2003 and is payable semi-annually in March and September.

Pursuant to the issuance of the Notes, the Company agreed to maintain
certain covenants. These covenants include, among others, (1) the timely payment of principal, premium, if any, and interest on the Notes; (2) the filing of the periodic and other reports that the Company is required to file with the SEC
pursuant to the Exchange Act with the trustee within 15 days after such reports are filed with the SEC; and (3) the delivery to the trustee of a compliance certificate within 120 days of the end of each fiscal year.

If the Company fails to observe or correct certain covenants for a period of 60 days after receipt of a notice of default from the trustee, such failure will constitute
an event of default under the Notes. Upon an event of default, the trustee or holders of at least 25% in aggregate principal amount of the Notes may accelerate the Notes such that the entire principal amount and any accrued and unpaid interest shall
become immediately due and payable. Holders of a majority in aggregate principal amount of the Notes may rescind acceleration if all events of default have been cured or waived, except nonpayment of the principal and any accrued and unpaid cash
interest that have become due solely because of the acceleration. As of September 30, 2007 the Company is in compliance with all debt covenants.

(8) Commitments and Contingencies

Litigation

IPO securities class action.

On November 5, 2001, a purported securities fraud class action complaint
was filed in the United States District Court for the Southern District of New York. In re Openwave Systems Inc. Initial Public Offering Securities Litigation, Civ. No. 01-9744 (SAS) (S.D.N.Y.), related to In re Initial Public Offering
Securities Litigation, 21 MC 92 (SAS) (S.D.N.Y.). It is brought purportedly on behalf of all persons who purchased the Companys common stock from June 11, 1999 through December 6, 2000. The defendants are the Company and five of its
present or former officers (the Openwave Defendants), and several investment banking firms that served as underwriters of the Companys initial public offering and secondary public offering. Three of the individual defendants were
dismissed without prejudice, subject to a tolling of the statute of limitations. The complaint alleges liability under Sections 11 and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, on the
grounds that the registration statements for the offerings did not disclose that: (1) the underwriters had agreed to allow certain customers to purchase shares in the offerings in exchange for excess commissions paid to the underwriters; and
(2) the underwriters had arranged for certain customers to purchase additional shares in the aftermarket at predetermined prices. The amended complaint also alleges that false analyst reports were issued. No specific damages are claimed.
Similar allegations were made in over 300 other lawsuits challenging public offerings conducted in 1999 and 2000, and the cases were consolidated for pretrial purposes.

The Company had accepted a settlement proposal presented to all issuer defendants. Under such settlement proposal, plaintiffs would have dismissed and released all claims against the Openwave
Defendants in exchange for a contingent payment by the insurance companies responsible for insuring the issuers and for the assignment or surrender of control of certain claims the Company may have against the underwriters. The Openwave
Defendants would not be required to make any cash payment in the settlement, unless the pro rata amount paid by the insurers in the settlement exceeds the amount of insurance coverage, a circumstance which the Company does not believe will
occur. The settlement required approval of the Court, which could not be assured, after class members were given the opportunity to object to or opt out of the settlement. The Court held a hearing on April 24, 2006 to
consider whether final approval should be granted. Subsequently, the Second Circuit vacated the class



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certification of plaintiffs claims against the underwriters in six cases designated as focus or test cases. Miles v. Merrill Lynch & Co.
(In re Initial Public Offering Securities Litigation), 471 F.3d 24 (2d Cir. 2006). Thereafter, the District Court ordered a stay of all proceedings in all of the lawsuits pending the outcome of plaintiffs petition to the Second Circuit
for rehearing en banc and resolution of the class certification issue. On April 6, 2007, the Second Circuit denied plaintiffs petition for rehearing, but clarified that the plaintiffs may seek to certify a more limited class in the
District Court. Accordingly, the parties withdrew the prior settlement, and Plaintiffs submitted amended complaints in designated focus or test cases with a revised class definition, in an attempt to comply with the Second Circuits ruling. We
believe a loss is not probable and estimable. Therefore no amount has been accrued as of September 30, 2007.

Shareholder Derivative Lawsuits.

On May 16, 2006, a report published by the Center for Financial Research and Analysis (CFRA) identified Openwave as a company at
risk for having engaged in backdating of stock options granted to our officers and directors. On May 22, 2006, we announced that we had received a notice of informal inquiry from the SEC requesting documents related to our stock option grants
and options granting practices. Following that announcement, seven substantially similar shareholder derivative actions were filed in California state and federal courts, purportedly on behalf of the Company, against various of the Companys
former and then-current directors and officers. The plaintiffs allege that the individual defendants mismanaged corporate assets and breached their fiduciary duties between 1999 and 2005 by authorizing or failing to halt the backdating of certain
stock options. The plaintiffs also allege that certain defendants were unjustly enriched by the receipt and retention of backdated stock options and that certain of the defendants sold Openwave stock for a profit while in possession of material,
non-public information. Certain of the plaintiffs also allege that the Company issued false and misleading financial disclosures and proxy statements from 1999 through 2005 and that the individual defendants engaged in a fraudulent scheme to divert
money to themselves via improper option grants.

On September 5, 2006, the state court consolidated the three actions pending before it into a single
action captioned In re: Openwave Systems Inc. Derivative Litigation (Consolidated Case No. CIV 455265) and appointed a lead plaintiff and lead counsel. On September 29, 2006, the lead plaintiff filed a consolidated amended shareholder
derivative complaint. On August 21, 2006, the individual defendants, joined by Openwave, filed a motion to stay the state court actions pending resolution of the federal actions. On December 4, 2006, the state court granted the
defendants motion to stay. The state court actions will remain pending and Openwave and the individual defendants will provide periodic status conferences until the federal actions are resolved. The plaintiffs in the state court actions have
the right to ask the court to lift the stay if circumstances change. The consolidated state court action is in its very early stages. No amount is accrued as of September 30, 2007 as a loss is not considered probable and reasonably estimable.

On October 11, 2006, the federal district court entered an order consolidating the four actions pending before it into a single action captioned In
re: Openwave Systems Inc. Shareholder Derivative Litigation (Hacker v. Peterschmidt et. al. Case No. 3:06-cv-03468-SI) and appointed lead plaintiffs and lead plaintiffs counsel. On December 29, 2006, plaintiffs filed an amended and
consolidated complaint. A motion to dismiss hearing was held on April 27, 2007, and the district court subsequently granted the motion to dismiss with leave for the plaintiffs to file an amended complaint. The plaintiffs filed an amended
complaint on June 29, 2007. On July 31, 2007, the defendants filed motions to dismiss, the court held a hearing on those motions onOctober 12, 2007, and the court has not yet issued an order with respect to
defendants motions. The consolidated federal court action is in its very early stages. No amount is accrued as of September 30, 2007 as a loss is not considered probable and reasonably estimable.

Securities Class Action.

Between February 21, and
March 27, 2007, four substantially similar securities class action complaints were filed in the United States District Court for the Southern District of New York against Openwave and four current and former officers of the Company. The
complaints purport to be filed on behalf of all persons or entities who purchased Openwave stock from September 30, 2002 through October 26, 2006 (the Class Period), and allege that during the Class Period, the defendants
engaged in improper stock options backdating and issued materially false and misleading statements in the Companys public filings and press releases regarding the manner in which Openwave granted and accounted for the options. Based on these
allegations, the complaints assert two causes of action  one against all defendants for violation of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, and a second against the individual defendants for violation of
Section 20(a) of the Exchange Act.

On April 25, 2007, the Company and the individual defendants filed a joint motion to transfer the actions to
the Northern District of California where the related shareholder derivative class actions are pending. On May 18, 2007, the court entered an order consolidating the four securities class actions into a single action captioned In re: Openwave
Systems Securities Litigation (Master File 07-1309 (DLC)), and appointing lead plaintiff and lead counsel. On June 14, 2007, the court entered an order denying the motion to transfer.



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On June 29, 2007, the plaintiffs filed a consolidated and amended class action complaint. The consolidated and
amended complaint adds 17 additional defendants, including several current and former Openwave officers and directors, KPMG LLP, and Merrill Lynch, Pierce, Fenner & Smith, Inc., Lehman Brothers Inc., J.P. Morgan Securities, Inc., and Thomas
Weisel Partners LLC. The consolidated and amended complaint alleges claims for violation of Sections 10(b), 20(a) and 20(A) of the Exchange Act and Rule 10b-5, as well as claims for violation of Sections 11, 12(a)(2) and 15 of the Securities Act of
1933 arising out of the Companys 2005 public offering. The complaint seeks money damages, equitable relief, and attorneys fees and costs. The Company is required under contracts with the individual defendants to indemnify them under
certain circumstances for attorneys fees and expenses.

On August 10, 2007, the defendants filed motions to dismiss the consolidated and amended
class action complaint. On October 31, 2007, the court entered an order granting in part and denying in part the defendants motions to dismiss. The court granted the motions to dismiss claims asserted under the
Securities Act of 1933 as to all defendants against whom those claims were asserted, and granted the motion to dismiss the Securities Exchange Act of 1934 claims against certain of the officer and director defendants, but denied the
motion to dismiss the Exchange claims asserted against Openwave and certain of the other director and officer defendants. As a result of the courts decision, KPMG LLP, Merrill Lynch, Pierce, Fenner & Smith, Inc., Lehman Brothers
Inc., J.P. Morgan Securities, Inc., and Thomas Weisel Partners LLC have all been dismissed as defendants from the litigation. The remaining defendants are the Company, certain former officers of the Company, and certain former and current directors
of the Company. The securities class action is in its very early stages. No amount is accrued as of June 30, 2007 as a loss is not considered probable and reasonably estimable.

Indemnification claims.

The Companys software license and services agreements generally include a
limited indemnification provision for claims from third parties relating the to Companys intellectual property. Such indemnification provisions are accounted for in accordance with FIN 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. As of September 30, 2007, no amount is accrued for indemnifications as there were no existing claims where a loss is considered probable.
Historically, costs related to these indemnification provisions have been infrequent and we are unable to estimate the maximum potential impact of these indemnification provisions on our future results of operations.

Contingencies.

We have various contingent obligations
associated with acquisitions made in the last two fiscal years as discussed in Note 6 above.

(9) Restructuring and Other Related Costs

As a result of the Companys change in strategy and its desire to improve its cost structure, the Company announced restructurings during the years ended
June 30, 2007 and 2006, and various other restructurings in 2002 through 2005.

The FY2007 Q4 Restructuring was implemented to simplify and better
align the Companys product portfolio with market demand, reduce costs and improve operating efficiencies. As such, during the fourth quarter of fiscal year 2007 and first quarter of fiscal year 2008, the Company incurred $17.5 million in
pre-tax restructuring and related charges associated with this Restructuring Plan and accelerated depreciation of abandoned assets. Included in restructuring and other charges are approximately $15.6 million related to employee termination benefits,
$1.7 million in stock compensation expense related to modifications of restricted stock grants in connections with the restructuring, $0.1 million related to accelerated depreciation on abandoned assets and $0.1 million in facilities charges.

During the quarter ended September 30, 2006, the Company implemented the FY2007 Q1 Restructuring to better align the Companys resources among
its operational groups and reduce the numbers of layers of management between customers and field and product organizations. As such, the Company incurred $9.9 million during the three months ended September 30, 2006 in pre-tax restructuring
and related charges associated with this Restructuring Plan and accelerated depreciation of abandoned assets. Included in restructuring and other charges are approximately $7.4 million related to employee termination benefits, $1.1 million in stock
compensation expense related to employee termination benefits and $1.4 million related to accelerated depreciation of abandoned assets.



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The following table sets forth the restructuring liability activity from June 30, 2007 through September 30,
2007 (in thousands):

Restructuring Plan initiated in:



|                                  |  |                    |        |   |          |   |      |                   |  |   |                   |   |  |                  |    |   |                    |   |         |   |  |   |     |   |  |   |         |  
|--------------------------------- |  | ------------------ | ------ | - | -------- | - | ---- | ----------------- |  | - | ----------------- | - |  | ---------------- | -- | - | ------------------ | - | ------- | - |  | - | --- | - |  | - | ------- | -
|                                  |  | FY 02 throughFY 05 |        |   | FY 06    |   |      | FY 07 Q1Severance |  |   | FY 07 Q4Severance |   |  | FY 07 Q4Facility |    |   | Total NetLiability |  
|                                  |  | Facility           |        |   | Facility |   |      | Severance         |  |   |                   |   | 
|Balance as of June 30, 2007       |  | $                  | 62,574 |   |          | $ | 425  |                   |  | $ | 53                |   |  | $                | 6  |   |                    | $ | 14,200  |   |  | $ |    |   |  | $ | 77,258  |  
|New charges (1)                   |  |                    |       |   |          |   | 57   |                   |  |   | (53               | ) |  |                  |   |   |                    |   | 621     |   |  |   | 51  |   |  |   | 676     |  
|Accretion expense                 |  |                    | 526    |   |          |   | 6    |                   |  |   |                  |   |  |                  |   |   |                    |   |        |   |  |   |    |   |  |   | 532     |  
|Cash paid, net of sublease income |  |                    | (3,011 | ) |          |   | (191 | )                 |  |   |                  |   |  |                  | (6 | ) |                    |   | (11,218 | ) |  |   | (34 | ) |  |   | (14,460 | )
|                                  |  |                    |        |   |          |   |      |                   |  |   |                   |   |  |                  |    |   |                    |   |         |   |  |   |     |   |  |   |         |  
|Balance as of September 30, 2007  |  | $                  | 60,089 |   |          | $ | 297  |                   |  | $ |                  |   |  | $                |   |   |                    | $ | 3,603   |   |  | $ | 17  |   |  | $ | 64,006  |  
|                                  |  |                    |        |   |          |   |      |                   |  |   |                   |   |  |                  |    |   |                    |   |         |   |  |   |     |   |  |   |         |  

As of September 30, 2007, the Company has sublease contracts in place for all of its exited facilities, which
provide for approximately $43.1 million of future sublease income from third parties. Excluding leases for Musiwave locations, future minimum lease payments under all non-cancelable operating leases with terms in excess of one year and future
contractual sublease income were as follows at September 30, 2007 (in thousands):



|                     |  |                            |         |                           |   |         |                                 |  |   |       
|-------------------- |  | -------------------------- | ------- | ------------------------- | - | ------- | ------------------------------- |  | - | ------
|Year ending June 30, |  | ContractualCash Obligation |         | ContractualSubleaseIncome |   |         | EstimatedFuture NetCash Outflow
|2008 (remaining)     |  | $                          | 14,366  |                           | $ | (5,411  | )                               |  | $ | 8,955 
|2009                 |  |                            | 18,870  |                           |   | (7,682  | )                               |  |   | 11,188
|2010                 |  |                            | 19,346  |                           |   | (7,938  | )                               |  |   | 11,408
|2011                 |  |                            | 20,387  |                           |   | (7,814  | )                               |  |   | 12,573
|2012                 |  |                            | 20,302  |                           |   | (7,835  | )                               |  |   | 12,467
|2013                 |  |                            | 16,487  |                           |   | (6,440  | )                               |  |   | 10,047
|                     |  |                            |         |                           |   |         |                                 |  |   |       
|                     |  | $                          | 109,758 |                           | $ | (43,120 | )                               |  | $ | 66,638
|                     |  |                            |         |                           |   |         |                                 |  |   |       

Future accretion expense on the restructured facility obligation is $6.2 million, which will be recorded as
restructuing expense over the life of the respective lease terms. Musiwave has facility operating lease commitments totaling $3.6 million through November 2013, which is comprised of annual rent of approximately $0.6 million.

(10) Gain on Sale of Technology and Other

During the quarter ended
September 30, 2005, we sold certain intellectual property relating to a non-core product. In September 2006, proceeds of $1.3 million which were previously held in escrow were received by us and recorded in Gain on sale of technology and other
when received.

(11) Income Taxes

Effective at the
beginning of the first quarter of fiscal 2008, the Company adopted the provision of FIN 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109. FIN 48 contains a two-step approach to
recognizing and measuring uncertain tax positions accounted for in accordance with SFAS No. 109, Accounting for Income Taxes. The first step is to evaluate the tax position for recognition by determining if the weight of
available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest
amount that is more than 50% likely of being realized upon ultimate settlement.

As a result of the implementation of FIN 48, the Company has accrued $0.2
million for the potential payment of interest and penalties relating to unrecognized tax benefits and accounted for the increase as a cumulative effect of a change in accounting principle that resulted in an increase to retained earnings of $0.2
million during the fiscal quarter ended September 30, 2007. The Company historically classified unrecognized tax benefits in accrued liabilities. As a result of adoption of FIN 48, $2.3 million in unrecognized tax benefits were
reclassified from accrued liabilities to long-term income taxes payable.

The Companys policy is to include interest and penalties related to
unrecognized tax benefits in income tax expense on the Companys consolidated statement of operations. As of the date of adoption of FIN 48, the Company had accrued $0.2 million for the payment of interest and penalties relating to unrecognized
tax benefits, as discussed above. During the quarter ended September 30, 2007, $24,000 of accrued interest and penalties was reversed in connection with the lapse of the applicable statute of limitations as discussed below, and $35,000 was
included in the provision for income taxes, resulting in an ending accrued amount of $0.2 million.



21



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The total amount of gross unrecognized tax benefits as of the date of adoption of FIN 48 was $4.9 million. As a result of
the lapse of the applicable statute of limitations for a particular tax position, the total amount of gross unrecognized tax benefits was reduced by $0.1 million during the quarter ended September 30, 2007. The total amount of gross
unrecognized tax benefits was $4.8 million as of September 30, 2007. Of this amount, $2.9 million would affect the effective tax rate if realized, and $1.9 million would be recorded as a reduction of goodwill if realized.

The Company files U.S. federal, U.S. state, and foreign tax returns. For federal returns, the Company is generally no longer subject to tax examinations for years prior
to June 30, 2006. Because of net operating loss carryforwards, substantially all of the Companys tax years, from fiscal 1995 through fiscal 2007, remain open to state tax examinations. Most of the Companys foreign jurisdictions have
three or four open tax years at any point in time



|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations.
|------- | --------------------------------------------------------------------------------------

Forward-Looking
Statements

In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based upon current expectations and beliefs of Management and are subject to
certain risks and uncertainties, including economic and market variables that may cause actual events, results or performance to differ materially from those indicated by such statements. Words such as anticipates, expects,
intends, plans, believes, seeks, estimates and similar expressions identify such forward-looking statements. Forward-looking statements include, among other things, statements regarding our
ability to attract and retain customers, obtain and expand market acceptance for our products and services, the information and expectations concerning our future financial performance and potential or expected competition and growth in our markets
and markets in which we expect to compete, business strategy, projected plans and objectives, anticipated cost savings from restructurings, our ability to realize anticipated benefits of our acquisitions on a timely basis, our estimates with respect
to future operating results, including, without limitation, earnings, cash flow and revenue and any statements of assumptions underlying the foregoing. These forward-looking statements are only predictions, not historical facts and are subject to
risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements. These risks and uncertainties include the limited number of potential customers, the highly competitive market for
our products and services, technological changes and developments, potential delays in software development and technical difficulties that may be encountered in the development or use of our software, patent litigation, our ability to retain
management and key personnel, and the other risks discussed below in Part II, Item 1A, under the subheading Risk Factors and elsewhere in this report. The occurrence of the events described in Part II, Item 1A, under the
subheading Risk Factors could harm our business, results of operations and financial condition. These forward-looking statements are made as of the date of this Quarterly Report on Form 10-Q and we undertake no obligation to revise or
publicly release the results of any revision to these forward-looking statements. Readers should carefully review the risk factors described in this section below and other risks identified from time to time in the Companys public statements
and reports filed with the Securities and Exchange Commission.

The following discussion and analysis of the Companys financial condition and results
of operations should be read in conjunction with the Companys consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2007, which was filed with the Securities and
Exchange Commission on August 29, 2007, and the unaudited condensed consolidated financial statements and related notes contained in this quarterly report on Form 10-Q.

Overview of Our Business and Products

Openwave is an independent provider of software products and services for the
communications industry. We provide our global customer base with software and services that enable them to launch new revenue generating content and communications services, leveraging our technology expertise in our messaging, gateway, client and
location businesses.

We have two categories of products:



| |  |  | Server products that are integrated at the edge and core of operator networks to enable the delivery of voice and video communication, messaging, location,
and content services to mobile handsets and personal computers; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  |  | Client softwarethat is embedded in mobile phones that allows handset manufacturers and operators to create and render rich service interfaces for mobile
browsing, messaging, and content services.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For further detail regarding our products, see our Annual Report on Form 10-K for our fiscal
year ended June 30, 2007.

We were incorporated in 1994 as a Delaware corporation and completed our initial public offering in June 1999. Our
principal executive offices are located at 2100 Seaport Boulevard, Redwood City, CA 94063. Our telephone number is (650) 480-8000. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to
those reports filed or furnished pursuant to the Securities Exchange Act of 1934, as amended, are available free of charge through our website at www.openwave.com or the SEC website at www.sec.gov, as soon as reasonably practicable
after we file or furnish such material with the SEC. Information contained on our website is not incorporated by reference to this report.

Overview of
Financial Results During the Three Months Ended September 30, 2007

The following table represents a summary of our operating results for our first
quarter of fiscal 2008 compared to the first quarter of fiscal 2007 (in thousands):



|                                         |  |                                 |         |   |                |   |         |   |  |     |  
|---------------------------------------- |  | ------------------------------- | ------- | - | -------------- | - | ------- | - |  | --- | -
|                                         |  | Three Months EndedSeptember 30, |         |   | Percent Change |  
|                                         |  | 2007                            |         |   | 2006           |   |        
|                                         |  | (unaudited)                     |         |   |                |  
|Revenues                                 |  | $                               | 62,972  |   |                | $ | 83,811  |   |  | -25 | %
|Cost of revenues                         |  |                                 | 29,299  |   |                |   | 33,505  |   |  | -13 | %
|                                         |  |                                 |         |   |                |   |         |   |  |     |  
|Gross profit                             |  |                                 | 33,673  |   |                |   | 50,306  |   |  | -33 | %
|Operating expenses                       |  |                                 | 49,417  |   |                |   | 74,198  |   |  | -33 | %
|                                         |  |                                 |         |   |                |   |         |   |  |     |  
|Operating loss                           |  |                                 | (15,744 | ) |                |   | (23,892 | ) |  | -34 | %
|Interest and other income (expense), net |  |                                 | 2,904   |   |                |   | 5,898   |   |  | -51 | %
|Income tax expense                       |  |                                 | 954     |   |                |   | 2,071   |   |  | -54 | %
|                                         |  |                                 |         |   |                |   |         |   |  |     |  
|Net loss                                 |  | $                               | (13,794 | ) |                | $ | (20,065 | ) |  | -31 | %
|                                         |  |                                 |         |   |                |   |         |   |  |     |  

Revenues decreased 25% during the three months ended September 30, 2007 compared to the corresponding period
of the prior year. The decrease was primarily in license revenues, which declined by 41% compared to the three months ended September 30, 2006. The decrease in license revenues was due to the reduction in bookings during the quarter ended
September 30, 2007, to $46.2 million from $72.2 million in the first fiscal quarter of the prior year. The decrease in bookings relates partially to our product transitioning, as well as to a general decrease in demand from several of our
largest mobile operator customers who are experiencing restructuring and internal reorganization.

Operating expenses decreased $24.8 million during the
three months ended September 30, 2007 compared to the corresponding period of the prior year. The decrease was due to certain unusual events during the three months ended September 30, 2006, including $5.5 million of costs associated with
our internal stock option practices review and legal costs associated with related lawsuits and a $9.3 million decrease in restructuring costs. We also experienced various decreases in operating expenses as a result of our restructuring plan
implemented during the fourth quarter of fiscal year 2007, as discussed in more detail below.

Operating Environment During the Three Months Ended
September 30, 2007

Data revenues continue to comprise a small, but growing, portion of mobile telecommunications operators total services
revenue today, with voice and messaging continuing to serve as primary revenue drivers. Although data services revenues are growing, the average revenue per user, commonly referred to as ARPU, has remained flat over the last several years for many
of Openwaves mobile operator customers. One of the major contributing factors is that the industry has not made the sharing of communications and content simple enough for the consumer due to the current multi-click and wait
environment. Openwaves zero click access approach is making content resident on the idle screen, or home page, of the mobile device via widgets, and many of its new products including Openwave Open Web, Open Internet Browsing
solution and Openwave Rich Mail, are designed to simplify access to and sharing of content and communications. These new technologies are designed to promote increased device usage and drive data growth in the industry in the mid-term. Until then,
Openwave sees continued, but reduced, capital equipment spending levels by the operators in the infrastructure market overall. Many of the products that Openwave and our competitors sell will continue to be viewed by operators as cost centers that
will maintain, but not grow, monthly ARPU until the industry succeeds in creating a more simple and intuitive experience for the user.



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Openwave announced new Board members during the first fiscal quarter 2008. Newly appointed members include Patrick Jones
a former financial executive with Intel and LSI Logic, Charles Levine, former President of Sprint PCS, and William Morrow, President and CEO of Pacific Gas and Electric and a former senior executive with Vodafone and Japan Telecom. Openwaves
President and CEO Robert Vrij has been appointed as the interim Chairman of the Board and the Company is actively seeking to appoint an independent chairman in the near term.

During the quarter ended September 30, 2007, Openwave worked with mobile operators and handset manufacturers to enable the delivery of personalized content and communications. Selected customer highlights
include:

Server Products:

Gateway



| |  |  | Openwaves next generation gateway solution features new funcitonalities, specifically multi-protocol and multi-service support, including Open Internet
Browsing. Openwave signed an agreement with Sprint for its new hosted Open Web solution for Open Internet Browsing, which s enables Sprint to provide browsing support for full html pages on mobile handsets.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In Europe, Openwave also received an order from a top tier operator in support of their upcoming launch of open internet browsing services based on the Openwave
Open Web solution, which is designed to deliver full internet content to mobile data-enabled devices.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Openwave signed a license agreement for its next generation gateway with Cellular South.
| | - |  | ----------------------------------------------------------------------------------------

Messaging



| |  |  | SoftBank Telecom, one of Japans largest telecommunication companies, selected Openwave Rich Mail, an AJAX-based solution that provides a dynamic Web interface
for broadband and mobile communications solutions.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Openwave also signed an agreement with a major North American cable company to trial Openwave Rich Mail.
| | - |  | --------------------------------------------------------------------------------------------------------

Location



| |  |  | Openwave signed an agreement with a key operator based in Japan to deploy a new location solution based on Secure User Plan Location (SUPL) standards which is
designed to enable higher accuracy location determination.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Client Products:

Openwave is working with a key EMEA OEM partners to develop a MIDAS Messaging UI that will allow them to offer operators a flexible way to present
messaging services on the device.

Critical Accounting Policies and Judgments

We believe that there are several accounting policies that are critical to understanding our business and prospects for our future performance, as these policies affect the reported amounts of revenue and other
significant areas that involve Managements judgment and estimates. These significant accounting policies are:



| |  |  | Revenue recognition
| | - |  | -------------------



| |  |  | Allowance for doubtful accounts
| | - |  | -------------------------------



| |  |  | Impairment assessment of goodwill and identifiable intangible assets
| | - |  | --------------------------------------------------------------------



| |  |  | Stock-based compensation
| | - |  | ------------------------



| |  |  | Restructuring-related assessments
| | - |  | ---------------------------------

For further
discussion of our critical accounting policies and judgments, please refer to the Notes to our Condensed Consolidated Financial Statements included in this Form 10-Q and to our audited consolidated financial statements and accompanying notes thereto
included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2007.

Stock-based compensation

Stock-based compensation is recorded in accordance with FAS 123R, which requires the use of judgment and estimates in performing multiple calculations. We have estimated
the expected volatility as an input into the Black-Scholes-Merton valuation formula when assessing the fair value of options granted. Our estimate of volatility was based upon the historical volatility



24



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##### Table of Contents

experienced in our stock price, as well as implied volatility in the market traded options on Openwave common stock. To the extent volatility of our stock
price increases in the future, our estimates of the fair value of options granted in the future could increase, thereby increasing stock-based compensation expense in future periods. For instance, an estimate in volatility ten percentage points
higher would have resulted in a $0.5 million increase in the fair value of options granted during the quarter ended September 30, 2007. In addition, we apply an expected forfeiture rate when amortizing stock-based compensation expense. Our
estimate of the forfeiture rate was based primarily upon historical experience of employee turnover, as well as consideration of historical data regarding pre-vesting option forfeitures by employees. To the extent we revise this estimate in the
future, our stock-based compensation expense could be materially impacted in the quarter of revision, as well as in following quarters. An estimated forfeiture rate of one percentage point lower since adoption of FAS 123R would have resulted in a
change of less than $0.1 million in stock-based compensation expense for the quarter ended September 30, 2007. Effective July 1, 2007, our expected term of options granted was derived from historical data, which uses the actual
post-vesting option exercise experience, as well as the average midpoint between vesting and the contractual term for outstanding options. Previously, we derived the expected term from the midpoint between vesting and the contractual term, as
described in the SECs Staff Accounting Bulletin No. 107, Share-Based Payment.

Summary of Operating Results

Three Months Ended September 30, 2007 and 2006

Revenues

We generate three different types of revenues. License revenues are primarily associated with the licensing of our software
products to communication service providers and wireless device manufacturers; maintenance and support revenues are derived from providing support services to communication service providers and wireless device manufacturers; services revenues are
primarily a result of providing deployment and integration consulting services to communication service providers; service revenues may include a limited amount of packaged solution elements which may be comprised of our software licenses,
professional services, third-party software and hardware.

The majority of our revenues have been from a limited number of customers and our sales are
concentrated in a single industry segment. During the three months ended September 30, 2007 and 2006 we had one significant customer, as shown in the following table:



|              |  |                                                   |   |  |      |  
|------------- |  | ------------------------------------------------- | - |  | ---- | -
|              |  | % of Total RevenueThree Months EndedSeptember 30, |  
|              |  | 2007                                              |   |  | 2006 |  
|Customer:     |  |                                                   |   |  |      |  
|Sprint Nextel |  | 21                                                | % |  | 22   | %

The following table presents the key revenue information for the three months ended September 30, 2007 and
2006, respectively (in thousands):



|                        |  |                                 |        |   |               |   |        |   |  |     |  
|----------------------- |  | ------------------------------- | ------ | - | ------------- | - | ------ | - |  | --- | -
|                        |  | Three Months EndedSeptember 30, |        |   | PercentChange |  
|                        |  | 2007                            |        |   | 2006          |   |       
|Revenues:               |  |                                 |        |   |               |   |       
|License                 |  | $                               | 17,323 |   |               | $ | 29,570 |   |  | -41 | %
|Maintenance and support |  |                                 | 21,644 |   |               |   | 22,813 |   |  | -5  | %
|Services                |  |                                 | 24,005 |   |               |   | 31,428 |   |  | -24 | %
|                        |  |                                 |        |   |               |   |        |   |  |     |  
|Total Revenues          |  | $                               | 62,972 |   |               | $ | 83,811 |   |  | -25 | %
|                        |  |                                 |        |   |               |   |        |   |  |     |  
|Percent of revenues:    |  |                                 |        |   |               |   |        |   |  |     |  
|License                 |  |                                 | 28     | % |               |   | 35     | % |  |     |  
|Maintenance and support |  |                                 | 34     | % |               |   | 27     | % |  |     |  
|Services                |  |                                 | 38     | % |               |   | 38     | % |  |     |  
|                        |  |                                 |        |   |               |   |        |   |  |     |  
|Total Revenues          |  |                                 | 100    | % |               |   | 100    | % |  |     |  
|                        |  |                                 |        |   |               |   |        |   |  |     |  



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##### Table of Contents

License Revenues

License revenues decreased by 41% during the three months ended September 30, 2007 as compared to the corresponding period of the prior year. As discussed above, the decrease in license revenues was due to the
reduction in bookings during the quarter ended September 30, 2007, to $46.2 million from $72.2 million in the first fiscal quarter of the prior year. The decrease in bookings relates partially to our product transitioning, as well as to a
general decrease in demand from several of our largest mobile operator customers who are experiencing restructuring and internal reorganization.

Maintenance and Support Revenues

Maintenance and support revenues decreased by 5% for the three months ended September 30, 2007
compared to the corresponding period of the prior year. The decrease is a result of the reduced license bookings throughout the prior fiscal year. As license bookings decreases, maintenance and support revenues from new licenses are less likely to
offset non-renewals or lower renewal amounts from existing customers.

Services Revenues

Services revenue decreased by 24% for the three months ended September 30, 2007, as compared to the corresponding period of the prior year. The decrease in the three
months ended September 30, 2007, was primarily related to the decline in bookings as discussed above in license revenues.

Other
Key Revenue Metrics

The other key revenue metrics reviewed by our CEO for purposes of making operating decisions and assessing financial performance
include our disaggregated revenues by product groups. The disaggregated revenues by product group for the three months ended September 30, 2007 and 2006 were as follows (in thousands):



|                       |  |                                 |        |               |   |        |  |     |  
|---------------------- |  | ------------------------------- | ------ | ------------- | - | ------ |  | --- | -
|                       |  | Three Months EndedSeptember 30, |        | PercentChange |  
|                       |  | 2007                            |        | 2006          |  
|Disaggregated revenue: |  |                                 |        |               |   |        |  |     |  
|Server                 |  | $                               | 52,970 |               | $ | 64,116 |  | -17 | %
|Client                 |  |                                 | 10,002 |               |   | 19,695 |  | -49 | %
|                       |  |                                 |        |               |   |        |  |     |  
|Total Revenues         |  | $                               | 62,972 |               | $ | 83,811 |  | -25 | %
|                       |  |                                 |        |               |   |        |  |     |  

The decrease in total revenues, as discussed above, impacted server revenues less than client revenues due to the
higher mix of service revenues in the server product line.



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##### Table of Contents

Cost of Revenues

The following table presents cost of revenues as a percentage of related revenue type for the three months ended September 30, 2007 and 2006, respectively:



|                        |  |                                 |        |               |   |        |  |     |  
|----------------------- |  | ------------------------------- | ------ | ------------- | - | ------ |  | --- | -
|                        |  | Three Months EndedSeptember 30, |        | PercentChange |  
|                        |  | 2007                            |        | 2006          |  
|Cost of revenues:       |  |                                 |        |               |   |        |  |     |  
|License                 |  | $                               | 2,879  |               | $ | 3,302  |  | -13 | %
|Maintenance and support |  |                                 | 8,320  |               |   | 7,829  |  | 6   | %
|Services                |  |                                 | 18,100 |               |   | 22,374 |  | -19 | %
|                        |  |                                 |        |               |   |        |  |     |  
|Total Cost of Revenues  |  | $                               | 29,299 |               | $ | 33,505 |  | -13 | %
|                        |  |                                 |        |               |   |        |  |     |  



|                                           |  |                                 |   |  |      |  
|------------------------------------------ |  | ------------------------------- | - |  | ---- | -
|                                           |  | Three Months EndedSeptember 30, |  
|                                           |  | 2007                            |   |  | 2006 |  
|Gross margin per related revenue category: |  |                                 |   |  |      |  
|License                                    |  | 83                              | % |  | 89   | %
|Maintenance and support                    |  | 62                              | % |  | 66   | %
|Services                                   |  | 25                              | % |  | 29   | %
|Total Gross Margin                         |  | 53                              | % |  | 60   | %

Cost of License Revenues

Cost of license revenues consists primarily of third-party license fees and amortization of developed technology and customer contract intangible assets related to our acquisitions.

Costs of license revenues decreased by 13% during the three months ended September 30, 2007, compared to the corresponding period of the prior year. The decrease is
attributable to the decrease in license revenues of 41%, offset by expenses related to certain royalties which are amortized at a minimum amount over the period products are licensed to us, regardless of the associated revenues we record.

Cost of Maintenance and Support Revenues

Cost of maintenance and support revenues consists of compensation and related overhead costs for personnel engaged in support services to wireless device manufacturers and communication service providers.

Cost of maintenance and support increased 6% during the three months ended September 30, 2007, as compared to the corresponding period of the prior year. The
increase in cost of maintenance and support revenues can primarily be attributed to an increase in labor costs and associated allocations of $1.6 million and equipment costs of $0.3 million, partially offset by a decline in information technology
expenses of $0.4 million and maintenance and services costs of $1.0 million.

Cost of Services Revenues

Cost of services revenues consists of compensation and independent consultant costs for personnel engaged in performing professional services, hardware purchased for
resale, and related overhead.

Cost of services decreased by 19% during the three months ended September 30, 2007, as compared to the corresponding
period of the prior year. The decrease in cost of services for the three months ended September 30, 2007 versus the prior year is related to the decrease in services revenue of 24%. Costs of services did not decrease as much as services revenue
decreased due to certain fixed services costs that continue regardless of revenue recognized.



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##### Table of Contents

Operating Expenses

Operating expenses decreased by 33% the three months ended September 30, 2007, as compared to the corresponding period of the prior year.

The following table represents operating expenses for the three months ended September 30, 2007 and 2006, respectively (in thousands):



|                                      |  |                           |        |   |               |   |        |   |  |      |  
|------------------------------------- |  | ------------------------- | ------ | - | ------------- | - | ------ | - |  | ---- | -
|                                      |  | Three MonthsSeptember 30, |        |   | PercentChange |  
|                                      |  | 2007                      |        |   | 2006          |   |       
|Operating expenses:                   |  |                           |        |   |               |   |        |   |  |      |  
|Research and development              |  | $                         | 15,042 |   |               | $ | 18,258 |   |  | -18  | %
|Sales and marketing                   |  |                           | 18,533 |   |               |   | 25,051 |   |  | -26  | %
|General and administrative            |  |                           | 13,920 |   |               |   | 15,470 |   |  | -10  | %
|Stock option review and related cost  |  |                           |       |   |               |   | 5,492  |   |  | N/A  |  
|Restructuring and other related costs |  |                           | 1,208  |   |               |   | 10,500 |   |  | -88  | %
|Amortization of intangible assets     |  |                           | 714    |   |               |   | 714    |   |  | 0    | %
|Gain on sale of technology            |  |                           |       |   |               |   | (1,287 | ) |  | -100 | %
|                                      |  |                           |        |   |               |   |        |   |  |      |  
|Total Operating Expenses              |  | $                         | 49,417 |   |               | $ | 74,198 |   |  | -33  | %
|                                      |  |                           |        |   |               |   |        |   |  |      |  
|Percent of Revenues:                  |  |                           |        |   |               |   |        |   |  |      |  
|Research and development              |  |                           | 24     | % |               |   | 22     | % |  |      |  
|Sales and marketing                   |  |                           | 29     | % |               |   | 30     | % |  |      |  
|General and administrative            |  |                           | 22     | % |               |   | 18     | % |  |      |  

Research and Development Expenses

Research and development expenses consist principally of salary and benefit expenses for software developers, contracted development efforts, related facilities costs,
and expenses associated with computer equipment used in software development. We believe that investments in research and development, including recruiting and hiring of software developers, are critical to remain competitive in the marketplace and
directly relate to continued development of new and enhanced products.

During the three months ended September 30, 2007, research and development
costs decreased 18% compared to the corresponding period in the prior year. This decrease is a result of our continuing efforts to streamline our business, including through our restructuring plan announced in June 2007. The year over year decrease
in workforce resulted in decreases of $2.2 million in labor and associated costs, $0.2 million in stock based compensation, $0.2 million in consulting allocations and $0.3 million in departmental allocations.

Sales and Marketing Expenses

Sales and marketing
expenses include salary and benefit expenses, sales commissions, travel expenses, and related facility costs for our sales and marketing personnel, and amortization of customer relationship intangibles. Sales and marketing expenses also include the
costs of trade shows, public relations, promotional materials, redeployed professional service employees and other market development programs.

During the
three months ended September 30, 2007, sales and marketing costs decreased by 26% compared to the corresponding period in the prior year. The decrease is primarily attributable to the decrease in workforce as part of the FY2007 Q4 Restructuring
Plan and resulted in a decrease of $3.7 million in labor and associated costs, a $1.7 million decrease in stock based compensation and $0.2 million in departmental allocations. Marketing costs also decreased by $0.7 million as the Company continued
to focus on streamlining the business.

General and Administrative Expenses

General and administrative expenses consist principally of salary and benefit expenses, travel expenses, and facility costs for our finance, human resources, legal,
information services and executive personnel. General and administrative expenses also include outside legal and accounting fees, provision for doubtful accounts, and expenses associated with computer equipment and software used in administration of
the business.

During the three months ended September 30, 2007, general and administrative costs decreased 10% compared to the corresponding period
in the prior year. This decrease from the prior year can be attributed to the reduction in workforce from the FY2007 Q4 Restructuring Plan, which resulted in a reduction in both labor and related costs of $2.6 million and stock-based compensation of
$1.3 million. These decreases were partially offset by an increase in professional fees of $1.9 million related primarily to litigation costs associated with the derivative lawsuits regarding alleged stock option granting practices.



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Stock Option Review and Associated Costs

During the fourth quarter of fiscal 2006, the Board of Directors formed a Special Committee to investigate an informal request the Company received from the Securities
and Exchange Commission regarding our historical stock option practices. As a result of the findings of the Special Committee, we remeasured certain stock option grants which resulted in additional stock-based compensation and associated payroll tax
expense for fiscal years 2000 through 2005. During this process, we incurred $5.5 million in additional professional fees, in particular related to legal and audit expenses during the three months ended September 30, 2006.

Restructuring and Other Related Costs

Restructuring
and other related costs for the three months ended September 30, 2007, decreased by 88% over the same period in the prior year. This decrease can be attributed to the fact that during the first quarter of fiscal 2007 the Company implemented a
new restructuring plan resulting in a $9.9 million restructuring expense charge, versus only $0.7 million of similar charges in the current quarter resulting from the FY2007 Q4 Restructuring Plan.

Refer to Note 9 in the notes to the condensed consolidated financial statements for more information.

Amortization of Intangible Assets

The following
table presents the total amortization of intangible assets:



|                              |  |                                 |       |      |   |      
|----------------------------- |  | ------------------------------- | ----- | ---- | - | -----
|                              |  | Three Months EndedSeptember 30,
|                              |  | 2007                            |       | 2006
|Developed and core technology |  | $                               | 1,899 |      | $ | 1,491
|Customer contracts - licenses |  |                                 | 137   |      |   | 6    
|Customer contracts - support  |  |                                 | 18    |      |   | 21   
|Customer relationships        |  |                                 | 687   |      |   | 687  
|Workforce in place            |  |                                 | 27    |      |   | 27   
|                              |  |                                 |       |      |   |      
|                              |  | $                               | 2,768 |      | $ | 2,232
|                              |  |                                 |       |      |   |      

Amortization of developed and core technology and customer contracts for licenses is included in cost of license
revenue in our condensed consolidated statements of operations. The increase in amortization in fiscal year 2008 reflects the increase due to the acquisitions of Widerweb in February 2007 and SoloMio in October 2006. These assets are being amortized
over an average useful life of four years.

Amortization of acquired customer support contracts is included in Cost of revenuesMaintenance and
support. These assets are being amortized over an approximate useful life of three years.

Amortization of acquired customer relationships and workforce in
place is included in Operating expenses. These assets are being amortized over an average useful life of four years.

Gain on Sale of
Technology and Other

During the quarter ended September 30, 2005, we sold certain intellectual property relating to a non-core product. Proceeds
of $1.3 million which were previously held in escrow were received by us in September 2006 and recorded in Gain on sale of technology and other when received.

Interest Income

Interest income was approximately $3.3 million for the three months ended September 30, 2007,
as compared to $6.3 million for the corresponding period of the prior year. The decrease in interest income in the three months ended September 30, 2007 can be attributed to the reduction in interest-earning investments due to the $100.0
million stock repurchase program which occurred during the third and fourth quarters of fiscal 2007 and the $99.4 million cash dividend paid in the fourth quarter of fiscal 2007.



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Interest Expense

Interest expense was approximately $1.2 million for the three months ended September 30, 2007, which was relatively consistent with the corresponding period in the prior year when interest expense was $1.3
million. The majority of our interest expense relates to our convertible subordinated notes issued in September 2003.

Other Income
(Expense), net

Other income (expense), net was approximately $0.8 million during both the three months ended September 30, 2007 and 2006. These
amounts primarily related to foreign exchange gains and losses on foreign denominated assets and liabilities.

Income Taxes

Income tax expense consisted of foreign withholding tax, foreign corporate tax and foreign deferred tax. Both foreign withholding tax and foreign
corporate tax fluctuate quarterly based on the product and geographic mix of our revenue, with a resulting fluctuation in our quarterly effective tax rate.

Income tax expense decreased by 54% for the three months ended September 30, 2007 compared to the corresponding period in the prior fiscal year due to the overall decline in revenue.

In light of our history of operating losses we recorded a full valuation allowance for our U.S. federal and state deferred tax assets. We intend to maintain this
valuation allowance until there is sufficient evidence to conclude that it is more likely than not that the federal and state deferred tax assets will be realized. As of September 30, 2007, we have foreign deferred tax assets recorded of
approximately $4.6 million in selected countries based upon our conclusion that it is more likely than not that the foreign subsidiaries in the respective countries will earn future taxable profits enabling the realization of their respective
deferred tax assets. As of September 30, 2007, we have approximately $1.6 million of deferred tax liabilities recorded with respect to acquisitions (exclusive of Musiwave) for which the amortization expense of acquired intangibles is not
deductible for tax purposes.

Discontinued Operations

During the third quarter of fiscal 2006, we acquired Musiwave, a leading provider of mobile music entertainment services to operators and media companies primarily in Europe. During June 2007, we committed to a plan
to sell Musiwave. In accordance with SFAS 144, Musiwaves financial results have been classified as discontinued operations in our condensed consolidated financial statements for all periods presented. The net assets associated with Musiwave
are currently considered held-for-sale and all prior periods have been revised in the condensed consolidated balance sheet and condensed consolidated statement of operations to reflect Musiwave as a discontinued operation. See Note 3 for
further information regarding the classification of Musiwave as a discontinued operation.

Operating Lease Obligations and Contractual Obligations

There has been no material change to our contractual obligations during the first quarter of fiscal year 2008. As such, see our Annual Report on Form 10-K
for the fiscal year ended June 30, 2007 for a description of our facility leases and Note 8 in the Notes to the consolidated financial statements. We currently have subleased a portion of our unused facilities which will generate sublease
income in aggregate of approximately $43.1 million through our fiscal year 2013.

On October 2, 2006, in connection with our acquisition of SoloMio,
in addition to the original consideration paid for the purchase, we may pay contingent consideration (SoloMio Earn Out) of up to an additional $5.5 million. The actual amount of the SoloMio Earn Out payments, if any, will be determined
based upon the achievement of revenue-related targets by the SoloMio product line over various periods between closing and December 31, 2007. No earn-out payments were made through September 30, 2007. During October 2007, we paid $0.8 million to the
former shareholders of SoloMio. The majority of the $0.8 million will be reflected as an increase to goodwill and the portion paid to employees will be recorded as operating expense in the quarter ending December 31, 2007. The remaining potential
SoloMio Earn Out pursuant to the merger agreement is $1.1 million, all of which may be earned during the fiscal quarter ended December 31, 2007.



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On February 9, 2007, in connection with our acquisition of WiderWeb, in addition to the original consideration paid
for the purchase, we may pay contingent consideration (WiderWeb Earn Out) of up to an additional $4.0 million. The actual amount, if any, will be determined based upon the achievement of revenue-related targets by the WiderWeb product
line over various periods between closing and February 8, 2009. During the first quarter of fiscal year 2008, approximately $0.8 million of the WiderWeb Earn Out was achieved. A total of $1.0 million of the WiderWeb Earn Out has been
achieved as of September 30, 2007 and was charged to goodwill on the consolidated balance sheet at the time the contingency was resolved. The remaining potential WiderWeb Earn Out pursuant to the merger agreement is $3.0 million as of
September 30, 2007. In addition, we may pay contingent consideration relating to a retention agreement (Retention Amount). The maximum amount potentially payable for the Retention Amount is $875,000 for the retention of certain key
employees of WiderWeb for a two-year period beginning February 9, 2007.

Off-Balance Sheet Arrangements

As of September 30, 2007, we have no off-balance sheet arrangements.

Liquidity and Capital Resources

Working Capital and Cash Flows

The following table presents selected financial information and statistics as of September 30, 2007 and June 30, 2007, respectively (in thousands):



|                                |  |                   |         |              |   |               |  |     |  
|------------------------------- |  | ----------------- | ------- | ------------ | - | ------------- |  | --- | -
|                                |  | September 30,2007 |         | June 30,2007 |   | PercentChange | 
|Working capital                 |  | $                 | 27,281  |              | $ | 207,191       |  | -87 | %
|Cash and cash investments:      |  |                   |         |              |   |               |  |     |  
|Cash and cash equivalents       |  | $                 | 127,378 |              | $ | 80,581        |  | 58  | %
|Short-term investments          |  |                   | 77,512  |              |   | 160,063       |  | -52 | %
|Long-term investments           |  |                   | 45,729  |              |   | 19,658        |  | 133 | %
|Restricted cash and investments |  |                   | 19,292  |              |   | 20,347        |  | -5  | %
|                                |  |                   |         |              |   |               |  |     |  
|Total cash and cash investments |  | $                 | 269,911 |              | $ | 280,649       |  | -4  | %
|                                |  |                   |         |              |   |               |  |     |  



|                                                 |  |                                 |         |   |      |   |         |  
|------------------------------------------------ |  | ------------------------------- | ------- | - | ---- | - | ------- | -
|                                                 |  | Three Months EndedSeptember 30, |        
|                                                 |  | 2007                            |         |   | 2006 |  
|Cash used for operating activities               |  | $                               | (10,446 | ) |      | $ | (5,963  | )
|Cash provided by (used for) investing activities |  | $                               | 55,623  |   |      | $ | (18,881 | )
|Cash provided by (used for) financing activities |  | $                               | (447    | ) |      | $ | 25      |  

We have obtained a majority of our cash and investments through public offerings of common stock and convertible
debt, including a common stock offering in December 2005 which raised $277.8 million in net proceeds. In addition, we received approximately $145.7 million from the issuance of our $150.0 million convertible subordinated notes during the fiscal year
ended June 30, 2004. While we believe that our current working capital and anticipated cash flows from operations will be adequate to meet our cash needs for daily operations and capital expenditures for at least the next 12 months, we may
elect to raise additional capital through the sale of additional equity or debt securities, obtain a credit facility or sell certain assets. If additional funds are raised through the issuance of additional debt securities, these securities could
have rights, preferences and privileges senior to holders of common stock, and the terms of any debt could impose restrictions on our operations. The sale of additional equity or convertible debt securities could result in additional dilution to our
stockholders, and additional financing may not be available in amounts or on terms acceptable to us. If additional financing is necessary and we are unable to obtain the additional financing, we may be required to reduce the scope of our planned
product development and marketing efforts, which could harm our business, financial condition and operating results. In the meantime, we will continue to manage our cash portfolios in a manner designed to ensure that we have adequate cash and cash
equivalents to fund our operations as well as future acquisitions, if any.



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Working capital

Our working capital decreased by approximately $179.9 million, or 87%, from June 30, 2007 to September 30, 2007. The decrease was primarily attributable to the fact that our $149.2 million convertible
subordinated notes that were previously classified in long term liabilities became a current liability beginning in the first quarter of fiscal year 2008. Other working capital decreases include a $16.6 million decrease in accounts receivable due to
the reduction in bookings during the quarter ended September 30, 2007.

Cash used for operating activities

Cash used for operating activities was $10.4 million during the three months ended September 30, 2007, compared with cash used for operating activities of $6.0
million in the corresponding period of the prior year. This increased use of cash from operations primarily relates to increased payments for restructuring activities, which were $14.5 million during the three months ended September 30,
2007 versus $6.3 million in the same period of the prior year, offset by the improved net loss, net of non-cash items.

Cash
provided by (used for) investing activities

Net cash provided by investing activities during the three months ended September 30, 2007 was $55.6
million, up $74.5 million from ($18.9) million used in investing activities during the three months ended September 30, 2006. This change was primarily due to the $74.2 million decrease in purchases of short-term and long-term investments, net
of proceeds from maturities during the same timeframe.

Cash flows provided by (used for) financing activities

Net cash used for financing activities during the three months ended September 30, 2007 was $0.4 million, compared to cash provided by financing activities of
$25,000 during the three months ended September 30, 2006. The majority of this increase in cash used for financing activities relates to the repurchase of common stock from employees.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

(a) Foreign Currency Risk

We operate internationally and are exposed to potentially adverse movements in foreign currency rate changes. We
have entered into foreign exchange derivative instruments to reduce our exposure to foreign currency rate changes on receivables, payables and intercompany balances denominated in a nonfunctional currency. The objective of these derivatives is to
neutralize the impact of foreign currency exchange rate movements on our operating results. These derivatives may require us to exchange currencies at rates agreed upon at the inception of the contracts. These contracts reduce the exposure to
fluctuations in exchange rate movements because the gains and losses associated with foreign currency balances and transactions are generally offset with the gains and losses of the foreign exchange forward contracts. We do not enter into foreign
exchange transactions for trading or speculative purposes, nor do we hedge foreign currency exposures in a manner that entirely offsets the effects of movement in exchange rates. We do not designate our foreign exchange forward contracts as
accounting hedges and, accordingly, we adjust these instruments to fair value through earnings in the period of change in their fair value. Net foreign exchange transaction gains included in Other expense, net in the accompanying
condensed consolidated statements of operations totaled $0.4 million for the three months ended September 30, 2007. As of September 30, 2007, we have the following forward contracts (in $000s):



|         |  |                |  |                        |  |                
|-------- |  | -------------- |  | ---------------------- |  | ---------------
|Currency |  | NotionalAmount |  | ForeignCurrencyper USD |  | Date ofMaturity
|AUD      |  | 500            |  | 1.15                   |  | 10/31/2007     
|CAD      |  | 1,500          |  | 1.06                   |  | 10/31/2007     
|CAD      |  | 2,000          |  | 1.01                   |  | 11/30/2007     
|EUR      |  | 2,500          |  | 0.73                   |  | 10/31/2007     
|EUR      |  | 2,500          |  | 0.73                   |  | 11/30/2007     
|EUR      |  | 3,500          |  | 0.73                   |  | 12/31/2007     
|EUR      |  | 1,500          |  | 0.71                   |  | 1/31/2007      
|JPY      |  | 50,000         |  | 114.24                 |  | 10/31/2007     
|JPY      |  | 450,000        |  | 114.26                 |  | 12/28/2007     
|GBP      |  | 2,000          |  | 0.50                   |  | 10/17/2007     



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(b) Interest Rate Risk

As of September 30, 2007, we had cash and cash equivalents, short-term and long-term investments, and restricted cash and investments of $270.0 million. Our exposure to market risks for changes in interest rates
relates primarily to corporate debt securities, U.S. Treasury Notes and certificates of deposit. We place our investments with high credit quality issuers that have a rating by Moodys of A2 or higher and Standard & Poors of A or
higher, and, by policy, limit the amount of the credit exposure to any one issuer. Our general policy is to limit the risk of principal loss and ensure the safety of invested funds by limiting market and credit risk. All highly liquid investments
with a maturity of less than three months at the date of purchase are considered to be cash equivalents; all investments with maturities of three months or greater and less than one year are classified as available-for-sale and considered to be
short-term investments; all investments with remaining maturities greater than one year are classified as available-for-sale and considered to be long-term investments. We do not purchase investments with a maturity date greater than three years
from the date of purchase.

The following is a chart of the principal amounts of short-term investments and long-term investments by expected maturity at
September 30, 2007 (in thousands):



|                               |  |                                               |        |      |            |            |            |   |                         |  |                         |   |         |  |   |        
|------------------------------ |  | --------------------------------------------- | ------ | ---- | ---------- | ---------- | ---------- | - | ----------------------- |  | ----------------------- | - | ------- |  | - | -------
|                               |  | Expected maturity for the year endingJune 30, |        |      | Cost Value |            | Fair Value
|                               |  | 2008                                          |        | 2009 |            | Thereafter |            |   | September 30,2007 Total |  | September 30,2007 Total
|Certificate of Deposit         |  | $                                             | 9,500  |      | $          |           |            | $ |                        |  |                         | $ | 9,500   |  | $ | 9,498  
|Commercial Paper               |  |                                               | 10,164 |      |            |           |            |   |                        |  |                         |   | 10,164  |  |   | 10,162 
|Corporate Bonds                |  |                                               | 16,591 |      |            | 12,256     |            |   | 9,224                   |  |                         |   | 38,071  |  |   | 37,972 
|Auction Rate Securities        |  |                                               | 20,200 |      |            | 22,670     |            |   |                        |  |                         |   | 42,870  |  |   | 42,870 
|Asset Backed Securities        |  |                                               |       |      |            | 84         |            |   |                        |  |                         |   | 84      |  |   | 84     
|Federal Agencies               |  |                                               | 19,597 |      |            | 3,059      |            |   |                        |  |                         |   | 22,656  |  |   | 22,655 
|                               |  |                                               |        |      |            |            |            |   |                         |  |                         |   |         |  |   |        
|Total                          |  | $                                             | 76,052 |      | $          | 38,069     |            | $ | 9,224                   |  |                         | $ | 123,345 |  | $ | 123,241
|                               |  |                                               |        |      |            |            |            |   |                         |  |                         |   |         |  |   |        
|Weighted-average interest rate |  |                                               |        |      |            | 5.7        | %          |   |                         |  |                         |   |        

Additionally, we had $19.3 million of restricted investments that were included within restricted cash and
investments on the condensed consolidated balance sheet as of September 30, 2007. $17.7 million of the restricted investments comprised a certificate of deposit to collateralize letters of credit for facility leases. $1.1 million comprises a
restricted investment to secure a warranty bond pursuant to a customer contract. Additionally, a balance of $0.5 million comprises a trade letter of credit related to a customer contract that required us to purchase hardware from a specific vendor.
The weighted average interest rate on our restricted investments was 4.1% at September 30, 2007. There have been no significant changes in risk exposure since September 30, 2007.

As of September 30, 2007, $22.7 million in certain auction rate securities, recorded in long-term investments on the condensed consolidated balance sheet, were
considered illiquid based upon recent auction results. As such, the fair value of these instruments was estimated at par value by a third party pricing firm that supplies pricing estimates to our investment managers. These instruments are all rated
AAA by Standard and Poors and Aaa by Moodys and $17.0 million of these illiquid investments are insured against defaults of principal and interest by third party insurance companies. If these securities begin trading below par value in
the future, we may be required to record losses on these investments if the decline in value is not deemed temporary.



|Item 4. | Controls and Procedures
|------- | -----------------------

(a) Evaluation of
Disclosure Controls and Procedures

The Companys management, with the participation of the Companys principal executive officer and principal
financial officer has evaluated the effectiveness of the Companys disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report, (the
Evaluation Date). Based on such evaluation, the Companys principal executive officer and principal financial officer have concluded that, as of the Evaluation Date, the Companys disclosure controls and procedures were
effective.

(b) Changes in Internal Control Over Financial Reporting



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There have not been any changes in the Companys internal control over financial reporting (as such term is defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended September 30, 2007 that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial
reporting.



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PART II Other Information



|Item 1. | Legal Proceedings
|------- | -----------------

IPO securities class action.

On November 5, 2001, a purported securities fraud class action complaint was filed in the United States District Court for the Southern
District of New York. In re Openwave Systems Inc. Initial Public Offering Securities Litigation, Civ. No. 01-9744 (SAS) (S.D.N.Y.), related to In re Initial Public Offering Securities Litigation, 21 MC 92 (SAS) (S.D.N.Y.). It is brought
purportedly on behalf of all persons who purchased the Companys common stock from June 11, 1999 through December 6, 2000. The defendants are the Company and five of its present or former officers (the Openwave
Defendants), and several investment banking firms that served as underwriters of the Companys initial public offering and secondary public offering. Three of the individual defendants were dismissed without prejudice, subject to a
tolling of the statute of limitations. The complaint alleges liability under Sections 11 and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, on the grounds that the registration statements
for the offerings did not disclose that: (1) the underwriters had agreed to allow certain customers to purchase shares in the offerings in exchange for excess commissions paid to the underwriters; and (2) the underwriters had arranged for
certain customers to purchase additional shares in the aftermarket at predetermined prices. The amended complaint also alleges that false analyst reports were issued. No specific damages are claimed. Similar allegations were made in over 300 other
lawsuits challenging public offerings conducted in 1999 and 2000, and the cases were consolidated for pretrial purposes.

The Company had accepted a
settlement proposal presented to all issuer defendants. Under such settlement proposal, plaintiffs would have dismissed and released all claims against the Openwave Defendants in exchange for a contingent payment by the insurance
companies responsible for insuring the issuers and for the assignment or surrender of control of certain claims the Company may have against the underwriters. The Openwave Defendants would not be required to make any cash payment in the
settlement, unless the pro rata amount paid by the insurers in the settlement exceeds the amount of insurance coverage, a circumstance which the Company does not believe will occur. The settlement required approval of the Court,
which could not be assured, after class members were given the opportunity to object to or opt out of the settlement. The Court held a hearing on April 24, 2006 to consider whether final approval should be
granted. Subsequently, the Second Circuit vacated the class certification of plaintiffs claims against the underwriters in six cases designated as focus or test cases. Miles v. Merrill Lynch & Co. (In re Initial Public
Offering Securities Litigation), 471 F.3d 24 (2d Cir. 2006). Thereafter, the District Court ordered a stay of all proceedings in all of the lawsuits pending the outcome of plaintiffs petition to the Second Circuit for rehearing en banc
and resolution of the class certification issue. On April 6, 2007, the Second Circuit denied plaintiffs petition for rehearing, but clarified that the plaintiffs may seek to certify a more limited class in the District Court.
Accordingly, the parties withdrew the prior settlement, and Plaintiffs submitted amended complaints in designated focus or test cases with a revised class definition, in an attempt to comply with the Second Circuits ruling. We believe a loss
is not probable and estimable. Therefore no amount has been accrued as of September 30, 2007.

Government Investigations.

On May 18, 2006, the Company received an informal notice from the U.S. Securities and Exchange Commission (SEC) advising that the commission had
commenced an informal inquiry into the Companys stock option grants and options-granting practices. The SECs letter requested that the Company produce documents related to the Companys stock options-granting practices. In June
2006, the Company received subpoenas from the United States Attorneys for the Northern District of California and the Southern District of New York also requesting documents relating to the Companys stock options-granting practices. The
Company has cooperated with the SEC and the U.S. Attorneys in these matters and intends to continue to do so. These investigations remain open; however, the Company has not received any recent communications from the SEC or the U.S. Attorneys
regarding these matters.

Shareholder Derivative Lawsuits.

On May 16, 2006, a report published by the Center for Financial Research and Analysis (CFRA) identified Openwave as a company at risk for having engaged in backdating of stock options granted to our
officers and directors. On May 22, 2006, we announced that we had received a notice of informal inquiry from the SEC requesting documents related to our stock option grants and options granting practices. Following that announcement, seven
substantially similar shareholder derivative actions were filed in California state and federal courts, purportedly on behalf of the Company, against various of the Companys former and then-current directors and officers. The plaintiffs allege
that the individual defendants mismanaged corporate assets and breached their fiduciary duties between 1999 and 2005 by authorizing or failing to halt the back-dating of certain stock options. The plaintiffs also allege that certain defendants were
unjustly enriched by the receipt and retention of backdated stock options and that certain of the defendants sold Openwave stock for a profit while in possession of material, non-public information. Certain of the plaintiffs also allege that the
Company issued false and misleading financial disclosures and proxy statements from



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1999 through 2005 and that the individual defendants engaged in a fraudulent scheme to divert money to themselves via improper option grants. The complaints
seek various forms of equitable relief (including, among other things, disgorgement of profits, rescission of options contracts, accounting and certain corporate governance reforms) as well as unspecified money damages. The Company is named as a
nominal defendant in all of the actions. However, because the plaintiffs purport to bring these claims on the Companys behalf, no relief is sought against the Company.

On September 5, 2006, the state court consolidated the three actions pending before it into a single action captioned In re: Openwave Systems Inc. Derivative Litigation (Consolidated Case No. CIV 455265) and
appointed a lead plaintiff and lead counsel. On September 29, 2006, the lead plaintiff filed a consolidated amended shareholder derivative complaint. On August 21, 2006, the individual defendants, joined by Openwave, filed a motion to stay
the state court actions pending resolution of the federal actions. On December 4, 2006, the state court granted the defendants motion to stay. The state court actions will remain pending and Openwave and the individual defendants will
provide periodic status conferences until the federal actions are resolved. The plaintiffs in the state court actions have the right to ask the court to lift the stay if circumstances change. The consolidated state court action is in its very early
stages. No amount is accrued as of September 30, 2007 as a loss is not considered probable and reasonably estimable.

On October 11, 2006, the
federal district court entered an order consolidating the four actions pending before it into a single action captioned In re: Openwave Systems Inc. Shareholder Derivative Litigation (Hacker v. Peterschmidt et. al. Case No. 3:06-cv-03468-SI)
and appointed lead plaintiffs and lead plaintiffs counsel. On December 29, 2006, plaintiffs filed an amended and consolidated complaint. A motion to dismiss hearing was held on April 27, 2007, and the district court subsequently
granted the motion to dismiss with leave for the plaintiffs to file an amended complaint. The plaintiffs filed an amended complaint on June 29, 2007. On July 31, 2007, the defendants filed motions to dismiss, the court held a
hearing on those motions onOctober 12, 2007, and the court had not yet issued an order with respect to defendants motions. The consolidated federal court action is in its very early stages. No amount is accrued as
of September 30, 2007 as a loss is not considered probable and reasonably estimable.

Securities Class Action.

Between February 21, and March 27, 2007, four substantially similar securities class action complaints were filed in the United States District Court for the
Southern District of New York against Openwave and four current and former officers of the Company. The complaints purport to be filed on behalf of all persons or entities who purchased Openwave stock from September 30, 2002 through
October 26, 2006 (the Class Period), and allege that during the Class Period, the defendants engaged in improper stock options backdating and issued materially false and misleading statements in the Companys public filings and
press releases regarding the manner in which Openwave granted and accounted for the options. Based on these allegations, the complaints assert two causes of action  one against all defendants for violation of Section 10(b) of the Exchange
Act and Rule 10b-5 promulgated thereunder, and a second against the individual defendants for violation of Section 20(a) of the Exchange Act.

On
April 25, 2007, the Company and the individual defendants filed a joint motion to transfer the actions to the Northern District of California where the related shareholder derivative class actions are pending. On May 18, 2007, the court
entered an order consolidating the four securities class actions into a single action captioned In re: Openwave Systems Securities Litigation (Master File 07-1309 (DLC)), and appointing lead plaintiff and lead counsel. On June 14, 2007, the
court entered an order denying the motion to transfer.

On June 29, 2007, the plaintiffs filed a consolidated and amended class action complaint. The
consolidated and amended complaint adds 17 additional defendants, including several current and former Openwave officers and directors, KPMG LLP, and Merrill Lynch, Pierce, Fenner & Smith, Inc., Lehman Brothers Inc., J.P. Morgan Securities,
Inc., and Thomas Weisel Partners LLC. The consolidated and amended complaint alleges claims for violation of Sections 10(b), 20(a) and 20(A) of the Exchange Act and Rule 10b-5, as well as claims for violation of Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933 arising out of the Companys 2005 public offering. The complaint seeks money damages, equitable relief, and attorneys fees and costs. The Company is required under contracts with the individual defendants to
indemnify them under certain circumstances for attorneys fees and expenses.

On August 10, 2007, the defendants filed motions to dismiss the
consolidated and amended class action complaint. On October 31, 2007, the court entered an order granting in part and denying in part the defendants motions to dismiss. The court granted the motions to dismiss claims
asserted under the Securities Act of 1933 as to all defendants against whom those claims were asserted, and granted the motion to dismiss the Securities Exchange Act of 1934 claims by certain of the officer and director
defendants, but denied the motion to dismiss the Exchange claims asserted against Openwave and certain of the other director and officer defendants. As a result of the courts decision, KPMG LLP, Merrill Lynch, Pierce, Fenner &
Smith, Inc., Lehman Brothers Inc., J.P. Morgan Sercurities, Inc., and Thomas Weisel Partners LLC have all been dismissed as defendants from the litigation. The remaining defendants are the Company, certain former officers of the Company, and certain
former and current directors of the Company. The securities class action action is in its very early stages. No amount is accrued as of June 30, 2007 as a loss is not considered probable and reasonably estimable.



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|Item 1A. | Risk Factors
|-------- | ------------

In addition to the other information set forth in
this report, you should carefully consider the factors discussed in Part I, Item 1A, Risk Factors in the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2007, which could materially affect the
Companys business, financial condition or future results. The risks described in the Companys Annual Report on Form 10-K are not the only risks facing the Company; additional risks and uncertainties may not be currently known to or may
be deemed immaterial by management but could materially adversely affect the Companys business, financial condition, and/or operating results.

There
have been no material changes to the Risk Factors.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

None.



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

None.



|Item 4. | Submission of Matters to a vote of Security Holders
|------- | ---------------------------------------------------

None.



|Item 5. | Other Information
|------- | -----------------

On August 27, 2007, the Companys
Board approved the amendment and restatement of the Companys Amended and Restated Bylaws to implement changes to the procedures by which a stockholder can make director nominations for consideration at the annual meeting of stockholders.
As revised, for a stockholders notice of a director nominee to be timely, such notice must be received no less than ninety (90) and no more than one hundred twenty (120) days prior to the anniversary of the preceding years
annual meeting date. Further, the amendments provide that if the annual meeting is set for a date more than twenty-five (25) days before or after the anniversary of the preceding years annual meeting, such stockholder notice must be
received not later than the tenth (10th) day following public disclosure of such annual meeting date. However, in order to provide sufficient time for stockholders to provide notice, the Amended and restated Bylaws provide that for the 2007
annual meeting, stockholder notice must have been received no later than the thirtieth (30th) day following public disclosure of the 2007 annual meeting date.



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##### Table of Contents

Item 6. Exhibits



|              |  |                                                                                                                                                                                                                    
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                        
|              | 
|3.1           |  | Certificate of Incorporation of Openwave Systems Inc. (the Company), as amended (incorporated by reference to Exhibit 3.1 to the Companys quarterly report on Form 10-Q filed
November 13, 2001).               
|              | 
|3.2           |  | Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Companys quarterly report on Form 10-Q
filed November 14, 2003).
|              | 
|3.3           |  | Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.1 to the Companys current report on Form 8-K filed August 2, 2007).                                                            
|              | 
|10.1          |  | Severance and Release Agreement with Harold L. Covert, dated July 31, 2007 (incorporated by reference to Exhibit 10.1 to the Companys current report on Form 8-K files August 2,
2007).                           
|              | 
|10.2          |  | Employment Agreement with Dr. Jean-Yves Dexmier, dated August 2, 2007 (incorporated by reference to Exhibit 10.2 to the Companys current report on Form 8-K files August 2,
2007).                                
|              | 
|31.1          |  | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                            
|              | 
|31.2          |  | Certification of the Chief Financial Officer pursuant Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                               
|              | 
|32.1          |  | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.                                 



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##### Table of Contents

SIGNATURES

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, thereunto duly authorized.

Date: November 8, 2007



OPENWAVE SYSTEMS INC.By:

/s/ Jean-Yves DexmierJean-Yves DexmierChief Financial Officer(Principal Financial and Accounting OfficerAnd Duly Authorized Officer)




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##### Table of Contents

INDEX TO EXHIBITS



|              |  |                                                                                                                                                                                                                    
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                        
|              | 
|3.1           |  | Certificate of Incorporation of Openwave Systems Inc. (the Company), as amended (incorporated by reference to Exhibit 3.1 to the Companys quarterly report on Form 10-Q filed
November 13, 2001).               
|              | 
|3.2           |  | Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Companys quarterly report on Form 10-Q
filed November 14, 2003).
|              | 
|3.3           |  | Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.1 to the Companys current report on Form 8-K filed August 2, 2007).                                                            
|              | 
|10.1          |  | Severance and Release Agreement with Harold L. Covert, dated July 31, 2007 (incorporated by reference to Exhibit 10.1 to the Companys current report on Form 8-K files August 2,
2007).                           
|              | 
|10.2          |  | Employment Agreement with Dr. Jean-Yves Dexmier, dated August 2, 2007 (incorporated by reference to Exhibit 10.2 to the Companys current report on Form 8-K files August 2,
2007).                                
|              | 
|31.1          |  | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                            
|              | 
|31.2          |  | Certification of the Chief Financial Officer pursuant Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                               
|              | 
|32.1          |  | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.                                 



40