Tuesday, February 5, 2008

Potential UT suitors and reach of UT technology

There has been no shortage of potential suitors for UTStarcom over the last few years. While known for its PAS business, UT has amassed a collection of technology and business units in emerging markets from handsets to next generation networks to multimedia/iptv. Whenever I read the WSJ or business articles, UT seems to come to mind because of their wide reach. This is not a case for selling the company. Rather, it is meant to show the wide reach of the company. The low enterprise value only makes it a viable acquisition for a lot of companies here in the US and abroad. I am not a techy so this will be from strategic/business point of view.

This topic will be covered in a series of posts, with different companies. If you would like to write about a company that is a good match for UT, let me know and I will post it. Rather than start with the usual suspects, I will start with Echostar Communications. This satellite company is the competitor of DirectTV. Last year, it acquired Sling Media, the maker of the Sling Box, for $300m. The Sling Box is a device that allows people to watch their premium cable/satellite programming over the internet. It has had an ongoing patent case against Tivo for years. Last Friday, the judgement against Echostar was upheld and it may have to pay $94 million to Tivo and halt DVR sales. http://www.marketwatch.com/news/story/tivo-shares-soar-29-court/story.aspx?guid=%7BF9BA4F2A%2D165E%2D4FE8%2D8850%2D22536A859FF9%7D&siteid=yhoof

Normally, I would not link EchoStar with UTSTarcom but UTs recent announcement of a contract win in Taiwan with cable provider Markwell Industrial Co was an incredible development and I believe has not been discussed enough. In the PR,


"We are currently in discussions with a number of cable operators in Taiwan who are interested in complementing their existing offering with IPTV-enabled services, and we anticipate surpassing more than one million IPTV subscribers in the country by 2009."

UT had initially won an iptv contract with a CLEC in Florida a couple of years ago but then the regulations turned against UT and it moved away from the US markets but vowed to come back in a couple of years. The opportunity to get back in the US with cable/satellite providers would be tremendous for UTStarcom. We already know that their system is cost efficient and can work in emerging countries. It can definitely be used with cable companies. If AT&T's U-verse and iptv in general pick up steam in the US, UT can slide right in and offer either a scaled down or full version of their end to end iptv system.

If Echostar buys UT, they could even turn around and sue Tivo. I'm sure they can find something in UTs thousands of patents to hit Tivo with. Anyway, whether an acquisition or just backdoor entry into the US iptv market, the value of UT's iptv system can be unleashed. What would that do to UTs stock price if UT landed a deal with a major US cable/satellite provider?

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