Thursday, May 1, 2008

SEC Settlement and stock "technicals"

"UTStarcom, Inc. (Nasdaq: UTSI - News), today announced a final settlement with the Securities and Exchange Commission (the "SEC") regarding the previously-disclosed SEC investigation of the Company's financial disclosures during prior reporting periods, historic option grant awards practices, certain historical sales contracts in China and other matters."

"UTStarcom Chief Executive Hong Liang Lu and former Chief Financial Officer Michael Sophie paid penalties of $100,000 and $75,000 respectively, but did not admit or deny the allegations, the SEC said in a statement."

"The executives "did little to ensure that the company's internal controls were adequate and effective" after they were warned of accounting weaknesses by outside auditors, said Marc Fagel of the SEC's San Francisco office."

The biggest winners in another one of the sad episodes with this company have been the shorts, accountants, Barton, and to a certain extent Blackmore. The company has been using the "growing too fast" excuse for just about all their accounting problems but can someone for once take some responsibility? I atleast hope Peter or some of the other senior executives can step up and overcome the "all excuses/poor performing" environment/mentality they have been in.

Being an engineer, I am biased towards the technical people in the company against the management/finance people. How long does it take to fix all the finances and accounting systems? Even up to now, their internal controls/accounting systems are not fully functional yet (let alone "world class").

I work for a company called Tetra Tech with close to 10k people that was put together with over 40 acquisitions through the years. Do things go wrong? Yes. Does it take 3 years to fix something? No Way. Can it go for 12 or 16 quarters without being profitable? No Way. Does it waste tens of millions in interest payments? No Way. Can it take its time addressing cost cuts when it is severely needed? No Way. And on and on.......

Instead of trumpeting the settlement today, the company should release how much the REAL cost to shareholders have been, offer an apology, and what restitutions the responsible parties will do with their compensations. Will it happen? I guess when pigs fly :-)

On a side note, the stock hit a 6 month high ($3.43) and up about 14% just this week. Did anything fundamentally change this week? Not really. Is it fundamentally different from when it hit $2.23 on March 17? Not really. The opportunities and roadblocks that we have been discussing in the blog, with management/board, and in the message boards continue whether the stock is at $3 or $10 (right now).

As a side note, see this set of posts from March 17, 2008:

and this one yesterday.

I selected the posts from Tigre as he is a well known poster and well informed regarding the company/technology/industry. Nothing has changed "fundamentally" but he went from looking at the glass half empty (or cracking) to buying the stock and even discussing broadband uptake in India (of all places).

Ultimately, the stock will be driven by fundamentals as Tigre mentioned but the technicals (stock) have improved and incorporates a whole slew of items and is the primary driver at this stage. This blog/group will continue to discuss fundamental issues and oversee the company performance every step of the way (and hopefully have given shareholders confidence to hold/buy under $3 which we have discussed constantly) but as we've seen in the past, people have to watch the technicals closely because it incorporates things we are not aware of.

If the stock goes back down or it pulls back as the stock moves higher, you can always come back to the blog/group. We will be here as a "put" on the price (in some respect). Otherwise, good luck on the way up and pay particular attention to Hangman's posts. He seems to know what he is talking about :-)

1 comment:

Anonymous said...

you forgot to mention, that tens of millions of western europeans as frontrunners have already adopted or are on the verge of using iptv up to now - utstarcom around at all in any country I checked!! those guys have the best system...??? so the story with these pathetic crooks continues again and again..! so sad! with respect