Sunday, August 31, 2008

Weekly recap - CFO Barton Retires

The stock closed at $3.26, down 10 cents or 3%. The stock is down 7 straight weeks and has lost $2.31/share or about 42%. The markets were also lower this week with the DOW/S&P losing about .78% and the Nasdaq 2%. The week's major news was the resignation of CFO Fran Barton and Senior VP international sales and marketing David King. Here are other news/commentary.

UT named #1 broadband infrastructure company in India - For the 2nd year in a row, UT was named by Voice& Data as the #1 broadband infrastructure company in India. Accoring to the PR, the number of broadband users has doubled from April 2007 to June 2008 to 4.38m. The target of reaching 20m users by 2010 shows that the India broadband market continues to be a good source of revenue for UTStarcom. The key for UT will be improving margins in that business unit. The position in broadband and iptv that UT has built over the last few years should hopefully start to benefit in the years to come.

China Netcom earnings - Both CT & CN reported earnings recently. Here is a PR from CN for their earnings. Here are some itmes related to UT.

-The Company reported a decline in total capital expenditure of 10.7% year-on-year to RMB 7,527 million. In particular, investment in the businesses of fixed-line and PHS only accounted for 4.4% of the total, down 13.2 percentage points compared to the same period last year.

-As of June 30, 2008, we had 108,510 thousand local access subscribers, 2,310 thousand less
than at the end of 2007. Of this number, fixed-line subscribers declined by 1,499 thousand, while PHS subscribers declined by 811 thousand.

-We are working to upgrade the “Family 1+” from bundled services to household-oriented multimedia information services. In May, 2008, we launched a family gateway, which offered comprehensive information services to “Family 1+” customers, combining simultaneous access to the internet through various PCs, wireless internet access, family video monitoring and IPTV services.
By the end of the first half of 2008, there were 9,971 thousand “Family 1+” subscribers. Penetration rate among broadband subscribers for the “Family 1+” service was 36%.

-We believe that, after the 2008 Beijing Olympic Games, the high-quality broadband network established during the Olympic Games as well as the broadband consumption habit developed during the Olympic Games, will lead to a fast and sustainable growth in the innovative business and thus help catalyze the Company’s strategic transformation.

-I read in the WSJ that CT was planning to add about 8m broadband subscribers per year for the next 4 years.

China IPTV procurement list- China Telecom (NYSA: CHA; 0728.HK) has announced the winning lists of equipment manufacturers that provincial branches should use for IPTV 2.0 platform and terminal equipment procurement. The winning manufacturers were split into three areas: systems platforms, standard-definition terminals and high-definition terminals.

China IPTV subscriber count as of Q2- There were 1.708 million subscribers of IPTV (Internet Protocol TV) service in the China market at the end of the second quarter of 2008, growing by 396,000 or 30.2% on quarter and by 132.1% on year, according to China-based consulting company Analysys International.
The exceptionally large growth in IPTV user base was due to the increased demand attributable to the Beijing 2008 Olympic Games, Analysys pointed out.

UT has maintained its market share (about 2x compared to ZTE) and the growth in China continues at a slow but steady pace (from 736k to 840k to 1m to 1.31m the last few quarters).

Barton's retirement package- Reviewing the two 8K filings regarding Bartons retention agreement/retirement package, it does seem Barton was good atleast with his own financials. When the $10m/4 year retention agreement was disclosed last November 30, 2007, the first installment was already given in November 2007. Thus, in just 9 months since the "four" year retention agreement was disclosed, Barton was able to collect two installments or 50% from a dollar standpoint. Even better for Mr. Barton, because the stock declined by nearly 50% from the June highs, he was able to receive nearly 877k shares for this year's installment. If the stock had maintained the mid $5 to $6 level and Barton continued to stay on till atleast November, he would only receive 400-500k shares. Projecting into Nov 30, 2009. If the stock hits $12, he would only receive 200k shares. If by Nov 30, 2010, the stock hits $20 (ok maybe wishful thinking), he would only receive a little over 100k. In any case, Barton has retired and hopefully the company can withstand his retirement and somehow manage to pull it together and continue their stellar run for shareholders :-)

Have a good rest of the Labor Day weekend everyone.

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