Sunday, August 24, 2008

Weekly recap - Management needs to act.

The stock closed the week at $3.36, down 10 cents or 3%. The markets rallied hard on Friday to pare losses. For the week, Nasdaq lost 1.5%, DOW .27%, and S&P .46%. The stock has now closed lower the last six consecutive weeks, dropping from $5.57 on July 7 for a loss of $2.21 or 40%. Technically, the stock is weak, trading below the 50 day ($4.8 or so) and the 200 day ($3.6 or so). There were no specific PRs from the company so I'd just like to discuss a couple of items.

IPTV - One of the disappointments during the last earnings call update is the iptv subscriber numbers. The company only added around 100k subscribers to reach 956k and mostly in China (Shanghai). Fellow shareholder Shadowdoc99 posted on the slow developments in iptv in China.
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_U/threadview?m=tm&bn=27187&tid=154720&mid=155008&tof=12&rt=2&frt=1&off=1 Hopefully, the olympics will accelerate the growth in China, which is the main growth driver for UTs iptv in the near term (6 to 12 months).

Shadow also discussed some developements that could help UT in India regarding iptv system storage clauses: The Information and Broadcasting Ministry in India, based on recommendation by TRAI, has mandated that all IPTV carriers make available up to 90 days of stored broadcasts for subscribers. Reliance is going to have conniptions over this requirement as they have signed on with Microsoft for IPTV and cannot meet this requirement without huge capex for storage. In fact, only UTSI's system can meet this requirement economically and so it seems India is standardizing on UTSI's IPTV system.

This blog has a lot of good information on the latest iptv news in India, http://dth-iptv-radio.blogspot.com/search/label/BSNL%20IPTV

It seems like the regulations in India are very favorable to UT's iptv system and that UT is well positioned in India. The problem now is that broadband uptake and iptv ramp is still very slow and overal iptv numbers are around 10k. Compared to the contract capacity that UT has signed with Aksh (with MTNL, BSNL), Bharti Airtel, Goa, and Sri Lanka numbering potentially over 2 million subscribers over the next 2 to 3 years, the current number is very disappointing to say the least.

The situation is not much different in other parts of the world, such as in Taiwan and Brazil, where UT has announced contract wins. The numbers are very small (about 5 to 10k live subscribers). The Taiwan contract for example was for an initial 20k UT set top boxes and targettied 500k within 2 years. That contract was announced in December of 2007 so it has been very slow as well. Recently, management has indicated some optimism there and from the China olympics but we'll just have to see how it plays out.

Share Buy Back and investor confidence - I've posted a couple of times on this the past week and shareholders have sent emails to management. The developments from the earnings call (revenue shortfall, cash losses) are very frustrating to shareholders. The company is reaching out to the investment community (roadshows, analyst day meetings, earnings call/shareholder meetings, webinars, etc) at a time when the company's performance does not seem to be improving (and in some respect deteriorating). As an existing shareholder, I have to now question why management is spending time/effort/money to tell their story, reach out to NEW analysts/investors when they can't even appease the existing shareholder base/investment community and when they have yet to even come close to sustainable profitability. It doesn't make any sense to me. From Sophie to Barton to Blackmore, it seems like management has kept on promising profitability in the "next year" but have not delivered. Everyone is hesitant to cut costs to get to profitability because they want huge growth further down the line but where are the committments? Where is the balance? Where does shareprice and shareholders come to play? More frustrating, when it doesn't happen, there are more excuses. Can someone there really deliver? I really want to challenge management to respond to their existing shareholders and be accountable for what you are spewing out. Management needs to act and start delivering.

I continue to call on shareholders to email management to implement a share buyback for all the reasons I have posted on. Have a good rest of the weekend to everyone.