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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

For the fiscal year ended June 30, 2003

OR

For the transition period from _________ to _________             

Commission file number: 001-16073

OPENWAVE SYSTEMS INC.

(Exact name of registrant as specified in its charter)

1400 Seaport Blvd.

Redwood City, California 94063

(Address of principal executive offices, including zip code)

(650) 480-8000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.001 Par Value

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 than 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined by Exchange Act Rule 12b-2) Yes x    No ¨

The aggregate market value of the voting stock held by nonaffiliates of the registrant was approximately $344,931,162 as of December 31, 2002 based upon the closing sale price on the NASDAQ National Market reported for such date. Shares of Common Stock held by each officer and director have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

There were 181,592,335 shares of the registrant’s Common Stock issued and outstanding as of August 15, 2003.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement relating to the Company’s 2003 Annual Meeting of Stockholders to be filed hereafter are incorporated by reference into Part III hereof.

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PART I

Forward-Looking Statements

In addition to historical information, this Annual Report 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 our management and are subject to certain risks and uncertainties, including economic and market variables. 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 the information and expectations concerning our future financial performance and potential or expected growth in our markets and the markets in which we expect to compete, business strategy, projected plans and objectives, anticipated cost savings from restructurings and our estimates with respect to future operating results, including, without limitation, EBITDA, earnings, cash flow and revenue. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements. Factors which could cause actual results to differ materially include those set forth in the risks discussed below under the subheading “Risk Factors” under Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report. 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 any subsequently filed reports.

Item 1.    Business

We are a leading independent provider of open standards software products and services for the communications industry. Our software products consist of client software for browsing and multi-media messaging, infrastructure software such as wireless application protocol, or WAP, gateways, which provide the underlying infrastructure to enable data services on mobile phones, and wireless and wireline applications, such as email and multimedia messaging and related services. As one of the early innovators in mobile data and messaging services, we have been a pioneer in the convergence of the Internet and mobile communications. In 1993, we developed our first e-mail messaging server. In 1995, we developed our initial technology that enables the delivery of mobile data services to mobile phones. In 1996, we introduced and deployed our first gateway and browser products. Recently, we launched new products, including our WAP2 Gateway and Openwave phone software tools Version 7 (V7), designed to bring a better user experience to mobile data applications that emphasizes advanced graphics and multi-media messages on color handsets. We also introduced Email Mx 6.0, our next generation email and messaging platform. We believe that the increased dependence on e-mail services, remote access to corporate intranets, and the rise of services such as ringtones, games and messaging on mobile phones, will provide us the opportunity to further benefit from demand for our software and services.

Our customers are communication service providers, including wireless and wireline operators, and handset manufacturers worldwide. We deliver products and technologies, which we refer to as “our IP”, and deep industry experience and knowledge which we refer to as “our IQ”, to partner with operators and manufacturers to continuously innovate and deliver differentiated services to subscribers. Our product development is focused on the following: client software, mobile infrastructure anchored by WAP, and open mobile alliance, or OMA, standards, and messaging applications built around a flexible Internet-Protocol messaging core.

We believe that our relationships with more than 70 operators and partnerships with more than 47 handset manufacturers will allow us to benefit from the growth of mobile data services. We have a team of professionals who

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work with leading mobile operators and handset manufacturers around the world at all stages of development and implementation of wireless services.

We were incorporated in 1994 as a Delaware corporation and completed our initial public offering in 1999. Our principal executive offices are located at 1400 Seaport Boulevard, Redwood City, CA 94063. Our telephone number is (650) 480-8000. Our annual report 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 Section 13 of the Securities Exchange Act of 1934, as amended, are available free of charge through our website at www.openwave.com, 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.

Recent Events

On August 24, 2003, we announced that Kevin Kennedy, Chief Operating Officer of the Company, will be leaving his position as an officer at the Company to join JDS Uniphase as its CEO. Mr. Kennedy will continue to serve on our Board of Directors and will serve as an advisor to CEO Don Listwin through June 30, 2004. We also announced that David Hose was promoted to Senior Vice President and Chief Development Officer with responsibility for overall product development and that Jon Shantz was promoted to Senior Vice President of Market Development with responsibility for corporate development, corporate marketing, developer marketing and industry standards cooperation.

In July 2003, our Board of Directors authorized the Company to seek stockholder approval for an amendment to the Company’s amended and restated certificate of incorporation to effect a reverse split of all outstanding shares of common stock. If effected, the reverse stock split ratio will be either a 1 for 3, 1 for 4 or 1 for 5, with the ultimate ratio to be determined in the discretion of the Board. We anticipate that our stockholders will vote on the proposed reverse stock split near the end of September 2003.

Industry Background

Growth of Messaging, Mobile Data, and Wireless Telecommunications

With the convergence of the Internet and mobile communications, the use of messaging, mobile data and wireless telecommunications has grown rapidly in the past few years. According to industry sources:

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Historically, growth of mobile data and messaging services has depended on several factors, including the availability of data-enabled handsets, next generation data networks and compelling data services. According to Ovum research, the market for advanced data-enabled wireless handsets is expected to grow from approximately 41.8 million at the end of 2002, to 272.3 million at the end of 2005. Growth of messaging services has been fueled by an increase in broadband Internet access services. According to Ovum research, broadband Internet subscriptions are expected to grow from 64.3 million at the end of 2002 to 225.9 million at the end of 2005.

The Market Opportunity

The telecommunications industry is currently marked by a multitude of business, service and technological transitions, which have created an extremely complex and challenging environment for the operators and vendors who serve the market. Key transitions include the technology transition from 2G to 2.5G to 3G networks and circuit-switch to IP technology. Services transitions include operators moving from offering just one service to providing end users with multiple applications and personalized services. In addition, operators are experiencing key business transitions, such as charging for minutes plus transactions and amount of data packets downloaded, and selling based on increased value of service offerings rather than competing on the sole basis of price. In order to successfully manage through these transitions, we believe communication service providers seek the right technology and expertise to develop new revenue generating data services and to manage network changes with minimum disruption.

New data services are emerging and are being actively deployed by service providers who are striving to increase revenue through, among other strategies, increased mobile data usage. Basic download services are improving as next generation networks and handsets enable the delivery of animation, color content and polyphonic ring tones, while games are becoming richer and more entertaining as mobile content providers develop applications for Java-capable devices. Location technologies may be used to launch innovative new applications, such as finding nearest restaurant locations, while person-to-person messaging is expanding beyond the realm of basic text messaging, as operators offer e-mail, and photo- and multimedia-messaging services.

The Openwave Solution

We provide phone software to handset manufacturers and scalable infrastructure software, messaging applications and services to communication service providers. Our products allow communication service providers to offer new revenue generating data services such as photo messaging, application downloads including games and music, and location-based services such as identifying a mobile phone user’s location in emergency situations. In addition, handset manufacturers can use our products such as browsers and applications for exchanging multi-media messaging, to build highly differentiated handsets and services for a wide range of phones. Our next generation software platform, Openwave phone software tools Version 7, is designed to drive mobile data usage by providing a common user experience across messaging, browsers, calendars, address books and other phone applications. Our strategy is to design software products and platforms and provide services that help our customers drive incremental subscriber revenues and increase subscriber loyalty while transitioning to a world of personalized data services, multiple applications and open standards-based networks.

Products and Services

Our products are open and modular, giving customers the ability to choose, mix and match the right products and technologies to bring usability to the mobile services they offer subscribers. Regardless of the brand of handset or the type of service operators select to roll out to subscribers, our technology and products are designed to work on

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multiple handset devices and technologies. Openwave products portfolio includes software in the areas of client software for mass market mobile phones, mobile infrastructure products and messaging application products for the communications industry. We also have a professional services group which supports our products. For financial information about our operational segments and geographic areas, see “Notes to Consolidated Financial Statements—Note 5” in our consolidated financial statements.

Client Software for Mass Market Mobile Phones

Our client software primarily includes our mobile phone browser that is designed and optimized for wireless devices. Our client software includes Openwave Mobile Browser, Openwave phone software tools Version 7, Openwave Mobile Messaging Client, and Openwave Mobile SDK:

Mobile Infrastructure Software Products

Our mobile infrastructure software products contain the foundation software required to enable Internet connectivity to mobile devices and the functioning of a set of applications for mobile users. These products include Openwave Mobile Access Gateway, Openwave Provisioning Manager, Openwave Download Manager, and the Openwave Location Manager:

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Messaging Applications Products

Our messaging applications products enable end users to exchange electronic mail, facsimile, voice mail and multimedia messages from PC’s, wireline telephones and mobile devices. Our messaging applications products include Openwave Email Mx, Openwave Multimedia Messaging Services Center (MMSC), Openwave IP Voice Mail and Openwave Voice Multimedia Messaging Services (MMS):

Professional Services

Our products and our customers’ networks are complex, requiring an experienced and knowledgeable professional services, support, and training organization to provide advanced solutions to our customers. Our support organization provides both 24-hour maintenance and support services to our operator customers and maintenance and engineering support services to wireless device manufacturers, who have ported our Openwave Mobile Browser and other device applications to their wireless devices. In addition, we provide consulting services to communication service providers who license our software and engage us to perform integration services relating to commercial launches of our technology, as well as value-added services that are designed to improve the end-to-end consumer experience, ultimately increasing adoption rates for wireless data services. As of June 30, 2003, we had 127 employees in our professional services organization.

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Customers

Communication Service Providers

We sell our software products worldwide, primarily to communication service providers, including wireless and wireline telecommunication operators and cable operators.

We also provide our communication service provider customers with professional services that enable them to rapidly adopt our technology and bring wireless and wireline Internet-based services and applications to market. Our professional services focus on those areas where our products interface with our customers’ internal systems such as billing, provisioning and customer care.

Our agreements with our communication service provider customers grant them nonexclusive licenses to use our software in connection with providing mobile data services to their subscribers. Pricing and payment terms for licenses are negotiated with each customer based upon subscriber count or transaction capacity. Products are licensed under either a perpetual license model or under a monthly or quarterly time-based license model. In addition, we typically provide fee-based maintenance and support services to our customers, under which they receive error corrections and remote support.

Handset Manufacturers

We license our Openwave Mobile Browser software and Openwave phone software tools Version 7 to more than 47 handset manufacturers. In addition, we provide engineering and support services to accelerate the introduction of new wireless device models that contain our Openwave client software.

Our agreements with handset manufacturers generally provide these customers with a nonexclusive license to include the Openwave Mobile Browser in the wireless devices that they sell. In addition, customers can elect to receive varying levels of fee-based maintenance and support services.

Research and Product Development

Our ability to meet our customer’s expectation of innovation and enhancement depends on a number of factors, including our ability to identify and respond to emerging technological trends in our target markets, develop and maintain competitive products, enhance our existing products by adding features and functionality that differentiate them from those of our competitors and bring products to market on a timely basis and at competitive prices. Consequently, we continue to enhance the features and performance of our existing products and have made, and intend to continue to make, significant investments in research and product development. Our research and development expenses were $115.1 million, $135.1 million and $135.0 million for the years ended June 30, 2003, 2002 and 2001, respectively. As of June 30, 2003, we had 583 employees engaged in research and product development activities.

Technology

Our success is dependent upon continued technological development and innovation. We have contributed to the development of mobile data services. Our messaging products have substantial innovation and technology dedicated to the specific and stringent needs of the service provider marketplace. Our products are based on open standards, and we contribute to the development of such standards; in particular, contributions are made in the areas of mobile Internet protocols, messaging, mobile Internet technology and enabling technologies for 2.5G and 3G networks.

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Our technology is designed for deployment on very large-scale networks. Our customers require highly scalable systems, tools for monitoring and managing systems and other features specific to the size, scale and performance characteristics of their networks and service offerings. Our technology is designed with these requirements in mind and includes features such as:

Mobile Access Gateway Technology

We have designed our Openwave Mobile Access Gateway to be modular, expandable, flexible, scalable and reliable. Using an architecture based on scalable, object-oriented technology, the Openwave Mobile Access Gateway typically runs on a large, distributed set of servers. Openwave Mobile Access Gateway is intended to meet the stringent performance, scalability and reliability requirements of communication service providers. The Openwave Mobile Access Gateway implements OMA specifications for communications with mobile phones and other mobile terminals and anticipates including standards ratified by the OMA.

Client Software Technology

Our client software technology is designed to be embedded in limited-function devices, such as wireless devices, and has minimum hardware resource requirements. The technology includes multiple applications, such as browsing and messaging, and platform support to enable the correct and efficient operation of these applications in a wide variety of mobile devices.

Messaging Platform Technology

We have developed a scalable platform for building messaging and other Internet-standard, data intensive applications. Our platform is based on a partitioned cluster architecture, which enables excellent scalability and performance across a wide variety of configurations. Our Internet messaging technology implements a wide variety of messaging standards, including SMTP, MIME, IMAP4, POP3, and VoiceXML. The message storage subsystem reliably and efficiently stores, organizes and retrieves a variety of messaging media types, including text, graphics, voice, audio and facsimile.

Directory Technology

Many of our products require access to common information, such as a user name, password, phone number or e-mail address. Our directory technology has a core database that contains the common information, and a set of high-speed replicas of that information. By using multiple replicas, the common information can be repeatedly accessed in a reliable and efficient manner. The replicas support the industry-standard Lightweight Directory Access Protocol (LDAP), so that third-party applications can access the information contained within the directory by using this standard format.

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Standards

We believe the growth and development of standards is key to our success and the success of our industry. Therefore, we take an active role in a number of industry standards organizations including the Open Mobile Alliance (OMA), the World Wide Web Consortium (W3C), Code Division Multiple Access (CDMA) Developer Group, Wireless Village, SyncML Consortium and Internet Engineering Task Force among others. In addition, the Third Generation Partnership Projects (3GPP and 3GPP2), which are the 3G standards organizations for the Global System for Mobile Communication (GSM) and CDMA, respectively, represent strategic standards for our products.

Sales, Marketing and Customer Support

We sell our products through both a direct sales force and third-party resellers. As of June 30, 2003, we had 515 employees in sales, marketing and customer support worldwide. Our sales and marketing groups focus on selling products by establishing and managing relationships with customers and resellers. Our customer support group focuses on performing maintenance and support. Our third-party resellers are strategic alliance partners such Cap Gemini, HP and IBM and mobile communications infrastructure companies such as Siemens.

International sales of products and services accounted for 60%, 68% and 66% of our total revenues for our fiscal years ended June 30, 2003, 2002 and 2001, respectively. Our international sales strategy is to sell directly to large operators and to partner with leading distributors and systems integrators who have strong industry backgrounds and market presence in their respective markets and geographic regions.

We believe that customer service and ongoing technical support are an essential part of the sales process in the telecommunications industry. Our services organization is dedicated to the success and satisfaction of customers. Senior management and assigned account managers play an important role in ongoing account management and relationships. We believe these customer relationships will enable us to improve customer satisfaction and develop products to meet specific customer needs.

We actively recruit content and application developers to our platform and make available to them free of charge our software development kit, Openwave SDK. We also provide them with free membership in the Openwave Developer Program, free e-mail-based support and the opportunity to participate in the Openwave Developer Alliance Program.

The Openwave Developer Alliance Program promotes a select group of our content and application developers as members. We screen applications to the Developer Alliance Program based on the availability and quality of the content or applications produced by the candidates. We perform joint marketing activities with Alliance partners, as well as provide introductions between them and our wireless communication service providers.

Competition

The market for wireless and wireline Internet standards-based infrastructure and applications software products and services continues to be intensely competitive. The widespread adoption of open industry standards may make it easier for new market entrants and existing competitors to introduce new products that compete with our software products.

We expect that we will continue to compete primarily on the basis of quality, technical capability, breadth of product and service offerings, functionality, price and time to market.

In the mobile products market, our competitors include LogicaCMG, Ericsson, Nokia, Qualcomm and 7.24 Solutions. In the client products market, our competitors include Nokia, Microsoft, Access, and Teleca Systems. In the

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messaging products market, our competitors include LogicaCMG, Comverse, Critical Path, Ericsson, iPlanet and Nokia. In the location products market, our competitors include Ericsson, Nokia, Intrado and Siemens.

Intellectual Property Rights

Our performance depends significantly on our ability to protect our intellectual property and proprietary rights in the technologies used in our products. If we are not adequately protected, our competitors could use the technologies that we have developed to enhance their products and services, which could harm our business.

We rely on a combination of patent, copyright, trademark, trade secret laws, confidentiality provisions and other contractual provisions to protect our intellectual property and proprietary rights, but these legal means afford only limited protection. Despite the measures we take to protect our intellectual property rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use information which we regard as proprietary. In addition, the laws of some foreign countries may not protect our intellectual property and proprietary rights as fully as do the laws of the United States. Thus, the measures we take to protect our intellectual property and proprietary rights in the United States and abroad may not be adequate. In addition, our competitors may independently develop similar technologies.

The market for wireless communications and the delivery of Internet-based services are characterized by the existence of a large number of patents and frequent litigation based on allegations of patent infringement. As the number of entrants into our market increases, the possibility of infringement claims against us grows. In addition, because patents can take many years to issue, there may be one or more patent applications now pending of which we are unaware, and which we may be accused of infringing when patent(s) issue from the application(s) in the future. To address any patent infringement claims, we may need to enter into royalty or licensing agreements on disadvantageous commercial terms. We may also have to incur significant legal expenses to ascertain the risk of infringing a patent and the likelihood of that patent being valid. A successful claim of patent infringement against us, and our failure to license the infringing or similar technology, could harm our business. In addition, any infringement claims, with or without merit, would be time consuming and expensive to litigate or settle and could divert management attention from administering our core business.

As a member of several groups involved in setting standards for the industry, such as the OMA, we have agreed to license our intellectual property to other members of those groups on fair and reasonable terms to the extent that the intellectual property is essential to implementing the specifications promulgated by those groups. Each of the other members of the groups has agreed to similar provisions.

Employees

As of June 30, 2003, we had 1,455 employees. None of our employees are covered by any collective bargaining agreements, except for certain employees located in Europe.

Item 2.    Properties.

Our principal office is located in Redwood City, California, where we lease a 283,000 square foot building under a 12-year lease that commenced in the fourth quarter of the fiscal year ended June 30, 2001. In addition, we have two options to extend the lease for five years each. We also have other facility leases in other locations in the United States and throughout the world.

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Item 3.    Legal Proceedings.

Former employee arbitration.    A former employee commenced arbitration against us in February 2002 alleging various claims for misrepresentation in connection with his employment agreement and for tortious constructive discharge from his employment. The demand for arbitration sought an award of damages in excess of $25 million. We made an offer to settle the entire matter to the former employee on November 13, 2002 for payment of $30,000, which was accepted by the former employee on November 27, 2002. We received the arbitrator’s entry of award and, in accordance with the settlement, made the $30,000 payment. The settlement requires the former employee to dismiss the case in its entirety, with prejudice.

IPO securities class action.    Based upon certain publicly available information, 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. The case is now captioned as In re Openwave Systems, Inc. (sic) 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.). The operative amended complaint is brought purportedly on behalf of all persons who purchased Openwave’s common stock from June 11, 1999 through December 6, 2000. It names as defendants Openwave and five of our present or former officers and several investment banking firms that served as underwriters of our initial public offering and secondary public offering. Pursuant to stipulation, the Court dismissed three of the individual defendants without prejudice, subject to an agreement extending the statute of limitations through September 30, 2003. The complaint alleges liability as 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 statement 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 other lawsuits challenging over 300 other initial public offerings and follow-on offerings conducted in 1999 and 2000. The cases were consolidated for pretrial purposes. On February 19, 2003, the Court ruled on all defendants’ motions to dismiss. The motion was granted as to one remaining individual defendant associated with Openwave. The motion was denied as to the claims against us and the other remaining individual defendant associated with us.

We decided to accept a settlement proposal presented to all issuer defendants. In this settlement, plaintiffs will dismiss and release all claims against the Openwave defendants, in exchange for a contingent payment by the insurance companies collectively responsible for insuring the issuers in all of the IPO cases, and for the assignment or surrender of control of certain claims we may have against the underwriters. The Openwave defendants will 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 we do not believe will occur. The settlement will require approval of the Court, which cannot be assured, after class members are given the opportunity to object to the settlement or opt out of the settlement.

IPO derivative litigation.    On May 3, 2002, we received notice of the pending filing of a purported shareholder derivative lawsuit titled Lefort v. Black et al. The case was removed to the United States District Court, Northern District of California, No. C-02-2465 VRW. Plaintiff asserts claims against the directors at the time of our initial public offering and one former officer, and the underwriters of that offering, for breach of fiduciary duty, negligence, breach of contract, and unjust enrichment. Plaintiff alleges that defendants injured Openwave because our shares were

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not sold for as high a price in the IPO as they otherwise could have been. We are aware that similar allegations have been made in other derivative lawsuits involving issuers that also have been sued in the Southern District of New York securities class action cases. On July 12, 2002, we moved to dismiss the initial complaint. Subsequently, plaintiff made demand that our Board of Directors assert Openwave’s purported claims. The Board of Directors appointed a Special Committee to consider the demand. The Special Committee issued a report and made recommendations regarding the disposition of the claims asserted by plaintiff. On November 4, 2002, plaintiff filed an amended complaint. On December 5, 2002, all defendants moved to dismiss the amended complaint. Subsequently, Openwave and individual defendants agreed to stay their motions, to allow the Court to consider the underwriters’ motion. On March 24, 2003, the Court granted the motion and dismissed the case with leave to amend. Plaintiff has not filed an amended complaint in federal court. On June 10, 2003, plaintiff filed a second derivative case in the Superior Court of California, San Mateo County. Lefort v. Credit Suisse First Boston Corp. et al., No. 431908. The complaint in this case makes the same allegations as the dismissed federal derivative complaint, as against the same defendants. It also adds as individual defendants other current or former officers or employees of Openwave, and some of their spouses. As against the new individual defendants and three carry-over individual defendants, the complaint alleges that these persons received money or benefits from the lead underwriter of our IPO in exchange for their influence in selecting that firm as underwriter. The complaint seeks payment of this money from these individual defendants to Openwave. The complaint appears to allege that the demand made in the federal derivative lawsuit was wrongfully refused. Openwave, individual defendants, and underwriters expect to respond to the complaint in September, 2003. We do not believe that resolution of this matter will have a material adverse effect on its financial position.

Commercial Dispute.    A reseller of our products, Intrado Inc., commenced arbitration proceedings against us on August 11, 2003 alleging breach of contract in connection with the performance of certain of our licensed software. The demand for arbitration does not include a specific demand for damages. Although the arbitration is in its preliminary stages, we believe the claims are without merit. We intend to defend the arbitration vigorously and do not believe that the resolution of this matter will have a material adverse effect on our financial position.

Item 4.    Submission of Matters to a Vote of Security Holders.

Not applicable.

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PART II

Item 5.    Market for Registrant’s Common Equity and Related Stockholder Matters.

Price Range of Common Stock

Our common stock has been listed for quotations on the Nasdaq National Market under the symbol OPWV. The following table sets forth the fiscal periods indicating the high and low closing sales prices for our common stock.

As of August 15, 2003, there were 772 holders of record of our common stock. We have not paid any dividends and currently intend to retain future earnings for reinvestment in our business or the repurchase of outstanding shares of our common stock. Therefore, we do not anticipate paying cash dividends in the foreseeable future.

On October 4, 2002, we issued approximately 161,000 unregistered shares in the purchase of infrastructure software technology from Personity, Inc. We believe that the transaction was exempt from the registration requirements of the Securities Act of 1933, as amended, under Section 4(2) or another applicable exemption.

Item 6.    Selected Financial Data

The tables that follow present portions of our consolidated financial statements and are not complete. You should read the following selected consolidated financial data in conjunction with our consolidated financial statements and related notes thereto and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Form 10-K. The consolidated statements of operations data for the years ended June 30, 2003, 2002, 2001, 2000 and 1999 and the consolidated balance sheet as of June 30, 2003, 2002, 2001, 2000 and 1999 are derived from our financial statements which have been audited by KPMG LLP. The quarterly results of operations for the years ended June 30, 2003 and 2002 represent information that is unaudited. The information is presented for illustrative purposes only and is not necessarily indicative of the periods shown, nor is it necessarily indicative of future results or financial position. Certain amounts in the consolidated financial statements have been reclassified to conform to the June 30, 2003 presentation.

You should also consider that on November 17, 2000, we merged with Software.com, Inc. in a transaction that was accounted for as a pooling-of-interests. In recording the pooling-of-interests combination, Software.com, Inc.’s consolidated financial statements for the year ended December 31, 1999 were combined with our consolidated financial statements for the years ended June 30, 1999. As of the merger date, Software.com changed its fiscal year end to June 30 to conform to our fiscal year end. Software.com’s consolidated financial statements for the year ended June 30, 2000 were combined with our consolidated financial statements for the same period. Software.com’s unaudited results of operations for the six months ended December 31, 1999 included revenues of $29.0 million, expenses of $37.2 million and net loss of $8.2 million. An adjustment has been made in stockholders’ equity as of June 30, 2000 to eliminate the effect of including Software.com’s unaudited results of operations for the six months ended December 31, 1999 in both the years ended June 30, 2000 and 1999.

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The following table sets forth yearly results of operations for fiscal years 2003, 2002, 2001, 2000 and 1999.

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Item 7.    Management’s Discussion and Analysis of Financial Condition and Results  
                 of Operations.

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:

These policies, and our procedures related to these policies, are described in detail below. In addition, please refer to the Notes to Consolidated Financial Statements for further discussion of our accounting policies.

Revenue Recognition

We recognize revenue in accordance with Statement of Position 97-2, Software Revenue Recognition (SOP 97-2), as amended by Statement of Position 98-9, Modification of 97-2 “Software Revenue Recognition” With Respect to Certain Transactions, and generally recognize revenue when all of the following criteria are met as set forth in paragraph 8 of SOP 97-2: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred, (3) the fee is fixed or determinable and (4) collectibility is probable.

One of the critical judgments we make is the assessment that “collectibility is probable.” Our recognition of revenue is based on our assessment of the probability of collecting the related accounts receivable balance on a customer-by-customer basis. As a result, the timing or amount of revenue recognition may have been different if different assessments of the probability of collection had been made at the time the transactions were recorded in revenue. In cases where collectibility is not deemed probable, revenue is recognized at the time collection becomes probable, which is generally upon receipt of cash.

Another critical judgment involves the “fixed or determinable” criterion. We consider payment terms where 80% of arrangement fees are due within 12 months from delivery to be normal. Payment terms beyond 12 months from delivery are considered extended and when greater than 20% of an arrangement fee is due beyond 12 months from delivery, revenue is recognized when due and payable. In arrangements where fees are due at least 80% within one year or less from delivery, we consider the entire arrangement fee as “fixed or determinable.”

Certain arrangements permit the customer to pay us maintenance and support fees based only on the number of active subscribers using our software product, rather than the number of subscribers to which the customer has committed to purchase under the license agreement. Such arrangements cause an implied maintenance and support obligation for us relating to unactivated subscribers. In these cases, we defer revenue equal to the Vendor Specific Objective Evidence (VSOE) of maintenance and support of the total commitment for the estimated life of the software. This additional deferral of maintenance and support revenue results in a smaller amount of residual license revenues to be recognized upon delivery.

In certain arrangements we recognize revenue based on information contained in license usage reports provided by our customers. If such reports are not received in a timely manner, no revenue is recognized in the current period.

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During the year ended June 30, 2002, we entered into a significant contract with a service partner, under which we will port our software to the service partner’s hardware/software platform in exchange for a predetermined reimbursement rate; the partner will resell our products and engage in other joint activities. We recognize porting services revenues from this contract as project revenues in our Consolidated Statement of Operations as the services are performed. With our adoption of EITF 00-21, Revenue Arrangements with Multiple Deliverables, during the quarter ended December 31, 2002, we separate the reseller and porting activities related to the project and will recognize reseller revenues separately as they are earned. Cumulative revenues recognized may be less or greater than cumulative billings at any point in time during the contract’s term. The resulting difference is recognized as unbilled accounts receivable or deferred revenue.

Allowance for Doubtful Accounts

The total allowance for doubtful accounts is comprised of a specific reserve and a general reserve. We regularly review the adequacy of our allowance for doubtful accounts after considering the size of the accounts receivable aging, the age of each invoice, each customer’s expected ability to pay and our collection history with each customer. We review any billed or unbilled invoice greater than 60 days past due to determine if a specific reserve is needed based on the risk category. In addition, we maintain a general reserve for all invoices billed, and not included in the specific reserve, by applying a percentage based on each 30-day age category. For unbilled invoices with no specific reserve application, we generally apply a percentage to the entire balance. In determining these percentages, we analyze our historical collection experience and current economic trends.

In calculating the reserve balance needed, we first reduce any accounts receivable balances if the arrangements underlying the billed invoices are determined to have offsetting balances in deferred revenue. Further, in circumstances where the entire relationship with a customer is at risk, all amounts in deferred revenue are used to offset all invoices related to the customer. Next, the remaining accounts receivable balance is reduced by subsequent receipts that are received prior to the allowance calculation. We then identify specific high-risk accounts, both billed and unbilled amounts, where collection is deemed unlikely and include the balance, or a portion of the balance, in the specific reserve. The remaining accounts receivable balance is segregated into 30-day aged categories and a general reserve percentage is applied to each category. A reserve percentage is also applied to the remaining unbilled amounts.

If the historical data we use to calculate the allowance provided for doubtful accounts does not reflect the future ability to collect outstanding receivables, additional provisions for doubtful accounts may be needed and the future results of operations could be materially affected. However, historically the reserve has proven to be adequate. Circumstances that have caused an increase to the allowance for doubtful accounts have been primarily due to a deterioration of the telecommunications industry over the last three years, primarily in Europe and Asia, excluding Japan, as well as downturns in the cable operator industry. The contraction of relevant economies may result in more customers being placed in the specific account reserve category, thereby increasing our reserve estimate and negatively impacting operating results.

Impairment Assessments

(a)  Goodwill and other intangibles

In accordance with Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, we review the carrying amount of goodwill for impairment on an annual basis. Additionally, we perform an impairment assessment of goodwill and other intangible assets whenever events or changes in circumstances indicate that the carrying value of goodwill and other intangible assets may not be recoverable. Significant changes in

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circumstances can be both internal to our strategic and financial direction, as well as changes to the competitive and economic landscape. Past changes in circumstances that were considered important for asset impairment include, but are not limited to, decrease in our market capitalization, contraction of the telecommunications industry, reduction or elimination of geographic economic growth, reductions in our forecasted growth and significant changes to operating costs.

As part of our impairment assessment, we examine products, customer base and geography. Based on these criteria, we determine which products we will continue to support and sell and, thereby, determine which assets will continue to have future strategic value and benefit. If indicators suggest the carrying value of our long-lived assets may not be recoverable, we complete an analysis of our long-lived assets under SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, using estimates of undiscounted cash flows in order to determine if any impairment of our fixed assets and other intangibles exists.

With the adoption of SFAS No. 142 on July 1, 2002, we have determined there is a single reporting unit for the purpose of goodwill impairment tests under SFAS No. 142. While we have selected the three months ending March 31 as the period in which the required annual impairment test will be performed, interim impairment tests may be necessary if indicators suggest the carrying value of the goodwill may not be recoverable. For purposes of assessing the impairment of our goodwill, we estimate the value of the reporting unit using our market capitalization as the best evidence of fair value. This fair value is then compared to the carrying value of the reporting unit. During the three months ended March 31, 2003, we performed this analysis and determined that there was no impairment of the remaining goodwill of $723,000.

During the year ended June 30, 2003, we completed an acquisition of a business, SignalSoft, for $63.9 million. At September 30, 2002, we had $7.3 million of goodwill recorded on the acquisition. The goodwill was adjusted by an additional $758,000 during the three months ended December 31, 2002 to reflect finalization of the purchase price allocation. The significant decrease in our market capitalization through September 30, 2002, as well as our announcement during the quarter of a restructuring, triggered the requirement for an impairment analysis of our goodwill and long-lived assets under SFAS No. 142 and 144. Upon completion of the recoverability test, we determined that none of our long-lived assets have been impaired under SFAS No. 144. We concluded that we are a single reporting unit under SFAS No. 142, and the fair value of the reporting unit is approximated by market capitalization under SFAS No. 142. Considering the significant decrease in our market capitalization from the date of the SignalSoft acquisition, all remaining SignalSoft goodwill as of September 30, 2002 was fully impaired. As the adjustments to the SignalSoft goodwill during the three months ended December 31, 2002 related to finalization of the purchase price allocation, the goodwill related to these adjustments was fully impaired during the three months ended December 31, 2002. The impairment of the goodwill resulted in impairment charges of $8.0 million for the year ended June 30, 2003 under “Amortization and impairment of goodwill and other intangible assets” in our Consolidated Statements of Operations.

During the year ended June 30, 2002, prior to the adoption of SFAS No. 142, we performed two separate impairment analyses as a result of changes within the telecommunications industry that led to reductions in our forecasted revenue. The triggering events for the quarters ended December 31, 2001 and June 30, 2002 include the restructuring plan that was announced during the quarter ended December 31, 2001 and the significant decrease in our market capitalization during the quarter ended June 30, 2002. For the December 31, 2001 impairment analysis, assets were grouped at the product level, which was the lowest level for which there were identifiable cash flows. For the June 30, 2002 analysis, to the extent that cash flows were not identifiable at the product level, we assessed

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impairment at the enterprise level. If the sum of the expected future cash flows expected to result from the use of the assets and their eventual disposition was less than the carrying amount of the assets, we recorded an impairment loss measured as the amount by which the carrying amount of the asset exceeded the fair value. The fair value was based upon the present value of the estimated expected future cash flows using a discount rate of 26.3% during the quarter ended December 31, 2001 and 22.6% during the quarter ended June 30, 2002. The assumptions supporting the estimated cash flows, including the discount rate and an estimated terminal value, reflect management’s best estimates. The discount rate was based upon the average of the long-term and short-term cost of capital using the risk-free rate, the expected return on the market portfolio and our risk-based rate. In addition, where all of the assets related to a specific acquisition had been abandoned, the goodwill and intangible asset balances relating to that acquisition were recorded as an impairment loss in accordance with Accounting Principles Board Opinion No. 17, Intangible Assets.

As a result of the impairment analyses, we recorded a $618.3 million impairment charge during the fiscal year ended June 30, 2002 within “Amortization and impairment of goodwill and other intangible assets” in our Consolidated Statements of Operations. The $17.4 million of goodwill and intangible assets remaining on our balance sheet at June 30, 2002 consists of goodwill and intangible assets related to the Ellipsus acquisition. Upon the adoption of SFAS No. 142 as of July 1, 2002, $14.5 million of goodwill related to the Ellipsus acquisition was recorded as a cumulative effect of change in accounting principle in our Consolidated Statements of Operations.

(b)  Strategic investments

We regularly perform an impairment assessment of our strategic equity investments. In performing an impairment assessment, Management considers the following factors, among others, in connection with the businesses in which investments have been made: the implicit valuation of the business indicated by recently completed financing or similar transactions, the business’ current solvency and its access to future capital. During the year ended June 30, 2003, total impairment charges were $5.3 million relating to three investments. In the prior fiscal year, four investments aggregating $5.6 million in privately-held companies had incurred a decline in value that was considered other-than-temporary. These impairment charges are recorded within “Impairment of nonmarketable equity securities” in our Consolidated Statements of Operations. As of June 30, 2003, the remaining book value of the investments in nonmarketable equity securities was approximately $1.1 million and is recorded within “Deposits and other assets” in our Consolidated Balance Sheets.

Restructuring—related assessments

Our critical accounting policy and judgment as it relates to restructuring-related assessments includes our estimate of facility costs and severance-related costs. To determine the facility costs, which consist of the loss after our cost recovery efforts from subleasing a building, certain estimates were made related to: (1) the time period over which the relevant building would remain vacant, (2) sublease terms and (3) sublease rates, including common area charges. The facility cost is an estimate representing the low end of the range and will be adjusted in the future upon triggering events (such as changes in estimates of time to sublease or changes in actual sublease rates). We have estimated that the lease loss for the fiscal 2003 and fiscal 2002 restructuring plans could be as much as $27.5 million higher if facilities operating lease rental rates continue to decrease in the applicable markets or if it takes longer than expected to find a suitable tenant to lease the facility. To determine the severance and employment-related charges, we have made certain estimates as they relate to severance benefits including the remaining time employees will be retained, the estimated severance period, as well as the estimated legal accruals. The severance and employment-related charges for the fiscal 2003 restructuring plan could be higher than these estimates should actual costs exceed these estimates.

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Results of Operations

Fiscal Years Ended June 30, 2003, 2002 and 2001

Revenues

We generate four different types of revenue. 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 wireless device manufacturers and communication service providers; professional services revenues are primarily a result of providing deployment and integration consulting services to communication service providers; and project revenues are derived from a porting services project. The majority of our revenues have been to a limited number of customers and our sales are highly concentrated. Significant customers during years ended June 30, 2003, 2002 and 2001 include Sprint, KDDI and mm02. Sales to Sprint accounted for 13%, 5% and 7% of total revenues during the years ended June 30, 2003, 2002 and 2001, respectively. Sales to KDDI accounted for 11%, 20% and 16% of total revenues during years ended June 30, 2003, 2002 and 2001, respectively. Sales to mm02 accounted for 2%, 8% and 15% of total revenues for the years ended June 30, 2003, 2002 and 2001, respectively. No other customers have accounted for 10% or more of total revenues for the years ended June 30, 2003, 2002 and 2001.

The following table presents selected revenue information for the fiscal years ended June 30, 2003, 2002 and 2001, respectively:

License Revenues

The decrease in license revenues for all comparable periods was primarily attributed to the economic downturn that significantly affected the telecommunications market, which resulted in a reduced number and value of new contracts and a decrease in the subscriber adoption rate over the prior year. In addition, increased competition, particularly in Europe, caused a further decline in license revenues.

Maintenance and Support Services Revenues

The increase in maintenance and support services revenues reflects the growth in the subscriber base of our customers and our ability to maintain contractual renewal rates of existing customer agreements.

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Professional Services Revenues

The decrease in professional services revenues from fiscal 2001 through fiscal 2003, was primarily due to a decrease in the number of new commercial launches of our technology.

Project Revenues

Project revenues, a new revenue category for us in fiscal year 2002, totaled $19.3 million and $5.3 million for fiscal years 2003 and 2002, respectively, and represent amounts recognized under our porting services arrangement with a service partner. Project revenues represented 7.2% and 1.4% of total revenues for the fiscal years ended June 30, 2003 and 2002, respectively.

Cost of Revenues

The following table presents cost of revenues as a percentage of related revenue type for the fiscal years ended June 30, 2003, 2002 and 2001, respectively:

Cost of License Revenues

Cost of license revenues consists primarily of the following: third-party license and related support fees; amortization of customer contract and relationship intangibles related to our acquisition of SignalSoft that was completed during the year ended June 30, 2003; and costs associated with our Applications Service Provider (ASP) business that we determined during the fourth quarter of fiscal 2001 would be exited, and a majority of the costs were completed by the end of the second quarter of fiscal 2002.

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The decrease in cost of license revenues during the fiscal 2003 as compared to fiscal 2002 was primarily a result of the cost of exiting our ASP business, offset by $2.1 million in amortization of customer contract and relationship intangibles. The decrease in cost of license revenues during fiscal 2002, as compared fiscal 2001, was primarily a result of the cost of exiting our ASP business.

Cost of Maintenance and Support Services Revenues

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

The decrease in costs for fiscal 2003 compared to fiscal 2002 was primarily due to our product realignment and restructuring efforts. Average maintenance and support headcount decreased by 24 employees in fiscal 2003, as compared to the prior year.

The increase in costs for fiscal 2002 compared to fiscal 2001 was primarily the result of an average increase in headcount of 12 people needed to service the increased demand of our customers.

Cost of Professional Services Revenues

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

The decrease in costs for fiscal 2003 compared to fiscal 2002, and fiscal 2002 compared to fiscal 2001 was primarily due to our product realignment and restructuring efforts resulting in a decrease in average headcount of 52 employees for fiscal 2003, as compared to fiscal 2002, and a average decrease of 57 employees for fiscal 2002, as compared to fiscal 2001. The decrease in headcount during fiscal 2003, as compared to fiscal 2002, was partially offset by higher consulting costs allocated to cost of professional services in fiscal 2003 due to the reorganization of the professional service departments during the first quarter fiscal 2003 restructuring.

Professional services gross margin decreased from 39.6% in fiscal 2002 to 12.9% during fiscal 2003. This decrease in margin was primarily due to lower revenues associated with the slowdown in the telecommunications market, the timing of revenue and expense recognition on certain multiple-element arrangements, as well as the realignment of the sales force during the first quarter fiscal 2003 restructuring.

Professional services gross margin increased from 36.1% in fiscal 2001 to 39.6% in fiscal 2002. This increase in margin was primarily due to increased efficiencies resulting in lower overhead costs.

Cost of Project Revenues

The cost of project revenues, a new cost category in fiscal year 2002, includes direct costs incurred in the performance of porting services for an arrangement with a service partner.

Operating Expenses

We have reduced costs and expenses to better align our resources with revenue opportunities anticipated in the current information technology market. In the fiscal years ended June 30, 2003 and 2002, we announced three separate restructurings that reduced or will reduce our workforce by approximately 12%, 24% and 17%, respectively. The

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reduced costs associated with the restructurings were primarily recognized during the latter of fiscal 2003 and fiscal 2002, respectively. Therefore, average overall headcount increased by 81 people during fiscal 2002 as compared to fiscal 2001 and decreased by 392 people during fiscal 2003 as compared to fiscal 2002. In addition to the restructurings, we also reduced variable costs across the company as a result of discretionary spending controls. In addition, in September 2001, we suspended the worldwide bonus plan and reversed the entire accrued expense. However, in fiscal 2003, we incurred employee bonuses paid based upon the achievement of customer satisfaction results and other current bonus programs were initiated for a select group of employees.

The following table represents operating expenses for the three fiscal years ended June 30, 2003, 2002 and 2001 respectively:

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 market place and are directly related to continued timely development of new and enhanced products.

As a result of our restructuring efforts, average research and development headcount decreased by 111 employees during the year ended June 30, 2003 compared to the prior fiscal period. The decrease in the headcount resulted in a $6.6 million decrease in salaries and other salary-related costs for the comparative period. In addition, the transition of certain employees to departments associated with project revenues decreased total research and development expenses by $10.0 million. We also incurred lower overall facility and IT department charges of $6.8 million due to the restructurings and other cost saving measures, as well as lower other overall costs of $3.6 million. The overall decrease was offset primarily by an increase in our dependence on contractors leading to a $500,000 increase in contingent workers expense due primarily to our decision to outsource certain projects to companies located in other countries such as India; and an overall increase in bonus expense of $6.5 million.

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Our average research and development headcount increased by 40 employees during the year ended June 30, 2002, resulting in a $9.7 million increase in salaries and other salary-related costs for the year compared to the prior fiscal period. In addition, we incurred higher overall facility and IT department charges of $4.4 million as a result of the expansion of our facilities including our headquarters in Redwood City during 2002, as well as higher other overall costs of $2.9 million. The overall increase was offset primarily by our decision during the fiscal 2002 restructuring to decrease our dependence on contractors leading to a $4.0 million decrease in contingent workers expense, a decrease in employee staffing development charges that was primarily due to decreases in recruiting fee payments of $4.2 million as a result of a less competitive job market, and a decrease in bonus expense of $9.4 million.

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. Sales and marketing expenses also include the costs of trade shows, public relations, promotional materials, redeployed professional service employees and other market development programs.

As a result of our restructuring efforts, average sales and marketing headcount decreased by 174 employees during the fiscal year 2003 compared to fiscal 2002 resulting in a $17.3 million decrease in salaries and other salary-related costs for the year as compared to the prior fiscal period. The transition of certain employees to departments associated with project revenues decreased total expenses by $400,000. We also incurred lower overall facility and IT department charges of $14.3 million as a result of the restructuring, as well as lower other overall costs of reductions of $10.6 million due to our cost cutting efforts. Employee staffing development charges decreased primarily due a decrease in recruiting fees of $2.4 million. We also decreased our dependence on contractors leading to a decrease of $1.3 million in contingent workers expense. Finally, commission expense decreased $1.6 million as a result of lower overall revenue. The overall decrease was offset primarily by an increase in bonus expense of $2.1 million.

Our average sales and marketing headcount increased by 75 employees during the year ended June 30, 2002, resulting in a $13.5 million increase in salaries and other salary-related costs for the year as compared to the prior fiscal period. In addition, we incurred higher overall facility and IT department charges of $7.1 million as a result of the expansion of our facilities including our headquarters in Redwood City during 2002, as well as higher other overall costs of $1.2 million. The overall increase was offset primarily by a decrease in our dependence on contractors leading to a $800,000 decrease in contingent workers expense, a decrease in employee staffing development charges that was primarily due to decreases in recruiting fees of $1.6 million as a result of a less competitive job market, a decrease in commission expense of $3.6 million as a result of lower overall revenue, and a decrease in bonus expense of $3.6 million.

General and Administrative Expenses

General and administrative expenses consist principally of salary and benefit expenses, travel expenses, and related 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.

As a result of our restructuring efforts, average general and administrative headcount decreased by 31 employees during the year ended June 30, 2003 compared to the prior fiscal period. The decrease in headcount resulted in a $900,000 decrease in salaries and other salary-related costs for the year compared to the prior fiscal period. Other costs

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savings included a decrease in our dependence on contractors leading to a decrease in expenses of $1.9 million, employee staffing charges decreased primarily due to a decrease in recruiting fees of $2.9 million, and other overall costs decreased $2.8 million. The provision for doubtful accounts decreased $7.6 million as a result of the net accounts receivable balance decrease of approximately $34.4 million and improved cash collections. Additionally, lower bad debt expense was required as a result of decreased risk associated with the accounts after certain amounts reserved for in the prior year were written off. This decrease was offset by an increase in bonus expense of $6.6 million.

Our average general and administrative headcount increased by 12 employees during the year ended June 30, 2002, resulting in a $4.2 million increase in salaries and other salary-related costs for the year compared to the prior fiscal period. This increase was offset by a decrease bonus expense of $2.1 million, as well as a decrease in other expenses of $4.9 million due to the restructuring.

Restructuring and Other Costs

As a result of our change in strategy and our desire to improve our cost structure, we announced three separate restructurings during the years ended June 30, 2003 and 2002. (See also Restructuring-related assessments under Critical Accounting Policies.) These restructurings included the fiscal 2003 fourth quarter restructuring (FY2003 Q4 Restructuring), the fiscal 2003 first quarter restructuring (FY2003 Q1 Restructuring), and the fiscal 2002 restructuring (FY2002 Restructuring.)

The FY2003 Q4 Restructuring was announced during the three months ended June 30, 2003 and included further reductions in operating expenses in order to better align our overall costs structure with current revenues. These reductions included a decrease in our workforce of approximately 170 employees who we expect to terminate during the quarter ended September 30, 2003. In connection with the implementation of the restructuring plan, we incurred $8.6 million in charges during the year-ended June 30, 2003. The restructuring costs included facility and equipment costs of $1.3 million, severance and employment related charges of $5.6 million, and other restructuring related costs of $1.7 million. Further, we expect to incur additional charges of approximately $2.5 million to $3.5 million during the first half of fiscal 2004, as a result of additional facilities that we plan to vacate as well as other restructuring charges. This restructuring effort is expected to lead to approximately $10 million of cost reductions within the next two to three quarters beginning with the quarter ended September 30, 2003, of which approximately 25% is expected to be realized in cost of revenues, 35% in research and development departments, 25% in sales and marketing departments and 15% in the general and administrative departments. The remaining restructuring accrual as of June 30, 2003 of $6.5 million consists of $5.9 million that is expecting to be paid during the year-ended June 30, 2004 and $600,000 expecting to be paid through various dates by February 2008.

The FY2003 Q1 Restructuring was announced during the three months ended September 30, 2002 and included the consolidation of products within three core product groups: application software and services, infrastructure software and services, and client software and services. This restructuring plan resulted in a decrease in our workforce of approximately 480 employees as of June 30, 2003. In connection with the implementation of this restructuring plan, we incurred $82.4 million in charges during the year-ended June 30, 2003. The restructuring costs included facility and equipment costs of $63.9 million, severance and employment related charges of $18.2 million, and other restructuring related costs of $300,000. This restructuring effort lead to approximately $25 to $30 million in quarterly cost savings, of which approximately 26% was realized in cost of revenues, 40% in research and development departments, 23% in sales and marketing departments and 11% in the general and administrative departments. The remaining accrual as of June 30, 2003 of $50.8 million consists of $8.8 million that will be paid during the year ended June 30, 2004 and $42.0 million that we expect to pay through various dates by April 2013.

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The FY 2002 Restructuring was announced during the three months ended December 30, 2001 as a result of our desire to improve our cost structure and profitability. This 2002 restructuring plan resulted in a decrease in our workforce of approximately 400 employees during the fiscal year-ended June 30, 2002. In connection with the implementation of the restructuring plan, during the year ended June 30, 2002 we incurred a total charges of $35.8 million in restructuring costs and an additional $1.9 million in accelerated depreciation charges related to the planned closing of certain facilities under the restructuring plan. During the year ended June 30, 2003, we incurred additional restructuring charges of $2.1 million. The restructuring costs included facility and equipment costs of $24.8 million, severance and employment-related charges of $10.3 million and other restructuring-related charges of $2.8 million. The restructuring effort led to $25 to $30 million in quarterly cost savings, of which approximately 10% was realized in cost of revenues, 35% was realized in the research and development departments, 30% in the sales and marketing departments and 25% in the general and administrative departments. The remaining restructuring accrual as of June 30, 2003 of $9.2 million is expected to be paid through various dates by 2012.

The following table summarizes the future payments on fiscal years 2003 and 2002 remaining restructuring liabilities:

Stock-Based Compensation

All stock-based compensation is being amortized in a manner consistent with Financial Accounting Standards Board Interpretation No. 28 (FIN No. 28), Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans. Stock-based compensation consists of continued amortization of the deferred stock-based compensation related to acquisitions, as well as compensation expense recognized on warrants, options issued to nonemployees and restricted stock granted to executives and other employees at exercise prices below the current fair value of our stock.

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During the year ended June 30, 2003, we reversed $1.7 million, of research and development stock-based compensation related to employees who have left Openwave, a result of a reduction in the estimate of the time period over which the corresponding employees would vest in the stock options. Excluding the reversal, stock-based compensation decreased $9.4 million during fiscal year 2003, as compared to the respective prior period, primarily due to continued amortization of deferred stock-based compensation.

Stock-based compensation increased $3.9 million from 2001 to 2002 primarily as a result of the Avogadro acquisition. Amortization of stock-based compensation related to the Avogadro acquisition for fiscal year 2002 totaled $7.4 million. Excluding the additional amortization relating to Avogadro, stock-based compensation would have decreased $3.5 million during fiscal year 2002 from continued amortization of stock-based compensation.

Amortization and Impairment of Goodwill and Other Intangible Assets, In-process Research and Development, and Cumulative Effect of Change in Accounting Principle

Up until our adoption of SFAS No. 142 on July 1, 2002, we were amortizing goodwill and other intangible assets on a straight-line basis over a three- to five-year period. During the year ended June 30, 2002, we performed two separate impairment analyses and recorded a total impairment charge to the remaining goodwill on the acquisitions acquired prior to June 30, 2002 of $618.3 million. During the year ended June 30, 2003, we performed an additional impairment analysis on the goodwill acquired in the acquisition of SignalSoft and recorded $8.0 million in impairment charges. The impairment charges for both years were reported in “Amortization and impairment of goodwill and other intangible assets” in the Consolidated Statements of Operations. As of June 30, 2003, we have $723,000 in goodwill, and in accordance with SFAS No. 142, the goodwill will not be amortized, but will be tested for impairment in the future which may result in future impairment losses.

(a)  The decrease in amortization of goodwill and other intangible assets for years ended June 30, 2003 and 2002, as compared to their respective prior fiscal years, was primarily due to the impairment of goodwill and other intangibles during fiscal year 2002. In addition, the amortization of acquisition-related contract intangibles in the amount of $2.1 million for the year ended June 30, 2003 was a result of the acquisition of SignalSoft and was recorded within “Cost of revenues: License” in the Consolidated Statements of Operations.

(b)  In-process research and development represents the fair value of the acquired in-process research and development projects that had not yet reached technological feasibility and had no alternative use. Accordingly, this amount was expensed when we acquired SignalSoft, and was reflected in our Consolidated Statements of Operations for the year ended June 30, 2003. See discussion of the In-process research and development below.

(c )  In addition to the discussion above regarding the impairment of goodwill and intangible assets, see “Critical Accounting Policies and Judgments—Impairment Assessments” for further discussion.

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(d )  During the year ended June, 30, 2003, we adopted SFAS No. 142 and recognized a transitional impairment of $14.5 million, which was reported as a cumulative effect of change in accounting principle.

In-Process Research and Development

For the acquisition of SignalSoft completed in July 2002, we allocated a portion of the purchase price to developed technology and in-process research and development (IPR&D). This allocation was based on whether or not technological feasibility had been achieved and whether there was an alternative future use for the technology. SFAS No. 86 Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed, sets guidelines for establishing technological feasibility. In general, SFAS No. 86 indicates that all costs of a product’s development should be expensed as incurred until technological feasibility, the point at which all significant risks of the development effort have been resolved, has been met. Technological feasibility is determined when a product reaches the “working model” stage, which is generally when a product is classified as a beta version release. Approximately $400,000 of the acquired in-process research and development projects that had not yet reached technological feasibility and had no alternative use were expensed at the time of the purchase according to the provisions of FASB interpretation No. 4, Applicability of SFAS No. 2 to Business Combinations Accounted for by the Purchase Method. The estimated fair value of these projects was based on their discounted cash flow model. The expensed amount is recorded in our Consolidated Statement of Operations for the year ended June 30, 2003.

Merger, Acquisition and Integration-Related Costs

As a result of the SignalSoft acquisition, we recorded merger, acquisition and integration-related costs in the amount of $386,000 for the year ended June 30, 2003 relating to retention bonuses for employees and other costs incurred solely as a result of the integration. Merger, acquisition and integration-related costs for the prior fiscal years totaled $89.5 million relating to the merger with Software.com, of which $570,000 were incurred during fiscal year 2002, and $88.9 million were incurred during the prior fiscal year. The $570,000 represented professional service fees associated with the merger. The remaining $88.9 million in merger and integration-related costs consist of merger costs totaling approximately $79.8 million made up of banker’s fees of $73.4 million, regulatory fees of $2.2 million, and professional services of $4.2 million, and the remaining $9.1 million were integration-related costs associated with our name change and other consulting fees as a result of the merger with Software.com.

Interest Income and Other, Net

Interest income and other, net, totaled $6.9 million, $11.4 million and $25.8 million for the years ended June 30, 2003, 2002 and 2001, respectively. The decreases in interest income for all of the comparable periods, was due to a reduced cash balance driven by the cash used to fund our operations, as well as the general decrease in interest rates during the periods.

Impairment of Nonmarketable Equity Securities

During the years ended June 30, 2003, 2002 and 2001, we impaired nonmarketable equity securities of $5.3 million, $5.6 million and $1 million, respectively. The impairments recorded represented three, four and one strategic investment(s) during the years ended June 30, 2003, 2002 and 2001, respectively. See Item 7, “Critical Accounting Policies and Judgements—Impairment Assessments” for further discussion.

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Income Taxes

Income tax expense totaled $11.0 million, $17.9 million and $13.0 million for the fiscal years ended June 30, 2003, 2002 and 2001, respectively. Income taxes in all periods presented consisted primarily of foreign withholding and foreign income taxes. Foreign withholding taxes fluctuate from year to year based on both the geographical mix of our revenue, as well as the timing of the revenue recognized. We expect to incur withholding and foreign corporate income taxes on an ongoing basis of approximately 4% to 6% of revenues.

In light of our recent history of operating losses, we recorded a valuation allowance for substantially all of our net deferred tax assets, as we are presently unable to conclude that it is more likely than not that the deferred tax assets in excess of deferred tax liabilities will be realized.

As of June 30, 2003, we had net operating loss carryforwards for federal and state income tax purposes of approximately $1.1 billion and $402.0 million, respectively.

Liquidity and Capital Resources

Operating Lease Obligations/Off-Balance Sheet Arrangements

As of June 30, 2003, our principal commitments consisted of obligations outstanding under operating leases. In March 2000, we entered into a lease for approximately 283,000 square feet of office space in Redwood City, California. The lease terms that commenced in April 2001 and requires a base rent of $3.25 per square foot per month increasing by 3.5% annually on the anniversary of the initial month of the commencement of the lease. The lease is for a period of 12 years from the commencement date. The agreement required that the we provide a letter of credit in the amount of $16.5 million. As of June 30, 2000, we guaranteed the letter of credit and pledged approximately $20.7 million, or 125% of the letter of credit, of cash equivalents and investments to be held in trust as security for the letter of credit. During the fiscal year ended June 30, 2002, we guaranteed additional letters of credit and pledged approximately $1.6 million for additional new locations outside Redwood City, California. The restricted cash and investments held in trust under these agreements are earning approximately 1.34% interest as of June 30, 2003, and the resulting income earned is not subject to any restrictions.

We had a financial commitment that was created in forming a joint venture during the year ended June 30, 2002 with a foreign partner within the Peoples Republic of China (“PRC”). Effective January 2003, prior to making any capital contribution, we mutually agreed with our partner in the PRC to terminate each of our respective obligations under the joint venture agreement. The purpose of the proposed joint venture was to provide a central point from which to provide software and services to China Unicom. China Unicom continues to be an important customer, and we have in the past provided, and expect in the future to continue to provide, software and services to China Unicom through channels other than the proposed joint venture.

We obtained a majority of our cash and investments from public offerings. Except for the operating lease obligations discussed above, we do not have any off-balance sheet arrangements as of June 30, 2003. All contractual obligations and commercial commitments have been reflected in the financial statements.

The following table discloses our gross contractual obligations as of June 30, 2003 (in thousands):

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Working capital and cash flows

The following table presents selected financial information and statistics as of June 30, 2003, 2002 and 2001, respectively: