Saturday, July 19, 2008

Weekly recap - quiet on the UT front

The stock closed at $5.18, down 39 cents or 7% for the week. The stock traded from $5.06 to a high of $5.62. In the last six weeks during the market turmoil, UT has traded above $5 (except for a couple of days) and settled into a trading range. Most of the news was focused on oil pulling back from the highs and the financials/airlines roaring back. That led to weekly gains of 3.57, 1.95, and 1.71% for the DOW, Nasdaq and S&P respectively. The only UT PR this week was a follow up iptv contract with Aksh in India. Here are other news I happen to come across that may have some (little) bearing on UT.

Financials earnings reports - Merrill Lynch and other financial companies reported "earnings" that were pretty bad but the stocks rallied anyway. This could be due to short covering or the stock being beaten down too much. In any case, ML continues to raise funds through asset sales such as their 20% holding in Bloomberg ($4.4b) and interest in Financial Data Services company ($3.5b). Most of the attention was in financials due to their importance in the economy. Because we are in a bear market, investors that want to play turnarounds (like UT) have a lot of choices to make. Do you go with large companies that may take longer to turn around but have "less risk" of outright failure or do you go with a small cap like UTStarcom that has less of a history and "more risks" due to its smaller size?

Nokia's report - Nokia reported increasing its global market share to 40% and expect global device volumes to grow by 10% or more in 2008 from 2007. More importantly, they reported a 42% unit growth in phone sales in the quarter in the Asia-Pacific region compared to flat sales in Europe. UT still derives $280m or so in their handsets unit (not including PAS) so this is an important segment to keep an eye on. Also, the growth in broadband, iptv, ngn in the areas UT is targetting looks to be a sound strategy.

Yahoo-Microsoft-Icahn soap opera - Its amazing how much information comes out and concern for the shareholders that management/boards show when put in a situation. I was amazed previously that Yahoo management balked at the $33 offer and now is begging Microsoft to offer it again. The one major lesson for all management/boards is to listen to your shareholders (and not when its wayyyyyyyy too late that it becomes embarrassing :-)

Naked shorting - I'm fairly sure that UT was hurt with naked shorting and partially responsible for the stock price diving down to the $2/share range. However, with all the problems that UT had, the shorts were right. If management/shareholders feel the stock gets too low, then they should do something about it. In the end, performance is what counts.

Earnings wait - Here we go again. Usually, UT reports about a month and a half after the quarter closes, so that puts the next call around mid August. With all the automation and resources that companies put in their finance departments, you would think they could get this done much sooner. As an engineer(none-finance person) voicing out again, why does it take so long for the finance people to do their audits and file their paperwork when most of the numbers can be automated. Its funny when I see these "MBAs" or economists struggle in their business math classes (watered down versions of math classes) and yet they hold the money/decision making powers. Anyway, hope they can file it sooner and give some decent projections for the second half and how revenue will close the gap with the expense metrics they have been mentioning since last year.

Personal trading and dentist - I did well last week (if you are basically long and you didn't, I don't know what to say) specially since I am waiting for UT to pull back. There is still a large short interest in the stock so that is both worrisome and encouraging. So, in the words of fellow shareholder Gator, it will either break the 52 week high and go into the $6s or it will fall under $5 :-) As for my crown, the dentist had postponed the appointment until this week and only to put the "temporary" crown. I still have to go back in two weeks to get the permanent crown. By that time, I will have another cavity. he he.

Have a good weekend everyone!

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