Sunday, November 30, 2008

Weekly Update - Rally?

The stock closed the week at $1.90, up 43 cents of 29%. The markets were significantly higher with the DOW, S&P, and Nasdaq rising 9.7%, 12%, and 11% respectively. Other telecom/equipment providers rose as well. Sonus was up to $1.55 from $1.46. Alcatel-Lucent up to $2.14 from $1.86. Ericsson up to $7.12 from $5.82. 3com up to $2.01 from $1.53 (nice move) and Nortel up to 0.57 from 0.42. While the market is up nicely from late last week's bottoms, the situation has just gone from really ugly to slightly ugly :-) As a side note, my 401k peaked at about $150k early this year and now is not even six figures. Of course, I'll probably be working another 30 years so it has some time to recover :-) At the current price of $1.9, UT is down 85 cents or 31% for the year. While that is not too unusual in this market, UT had been up over 100% as late as July this year and down about 80% from early last year.

Asia IPTV - From eganameten, here is an article on iptv in Asia. Even at this juncture, there are signs of a "slowdown" in worldwide iptv as Europe and places like Hong Kong have had a few years of very good growth. Sigma designs recently warned of slowing in iptv but in general, there should be very good growth for UT markets.

"In numerical terms, China is already a major IPTV player, with 2.2 million subscribers at the end of Q3 (China Telecom had 1.51 million, China Netcom 690,000), but content and licensing requirements so far prevent it becoming mass market. (So too, does the political capital previously expended on building major cable networks.)

IPTV licenses are not issued directly to telecom operators, which control the infrastructure, but rather to joint operations between telecom carriers and IPTV broadcasters. Further, they require three separate licenses from the Ministry of Industry and Information Technology and a fourth, an Internet culture business license, from the Ministry of Culture. And local telecom operators are only allowed to offer IPTV in cooperation with national IPTV license holders -- a China Telecom branch in Hubei Province was recently fined for breaching this rule."

China Telecom completes iptv upgrade in Shanghai - I got the text from an institutional holder....China Telecom completes upgrade to support 900,000 IPTV users in Shanghai Shanghai. November 26. INTERFAX-CHINA - China Telecom recently finished upgrading its IPTV (Internet Protocol Television) network in Shanghai to support up to 900,000 simultaneous users, domestic media reported onNov. 26. ZTE Corp., UTStarcom Inc. and Huawei Technologies won the tender to upgrade the network in different districts of Shanghai, Chinese IPTV industry portal reported. The three companies were also selected to supply IPTV set-top boxes, along with two other domestic set-top box suppliers, namely Shenzhen Coship Electronics Co. Ltd. and Chengdu USEE Digital Technology Co. Ltd., the report said. "It is very likely that China Telecom will kick off a new round of IPTV network upgrades next year because the IPTV user base is expanding much faster than expected," Zhang Yanhong, an industry analyst and founder, told Interfax. The IPTV user base in Shanghai is expanding more rapidly than in any other Chinese city. As of Nov. 25, Shanghai had more than 700,000 IPTVusers, more than triple that recorded at the end of 2007. IPTV in Shanghai is jointly operated by China Telecom and Shanghai Media Group, the largest media group in the region.

Upcoming Conference Call - The cc to discuss OPEX reduction in December should help UT stock back to the $2+ level. At the current market cap of $240m, it assumes UT will lose an additional $60m in cash flow, the building/property are not worth anything, and technology which they have invested hundreds of millions + all client relationships are worth nothing. If nothing else, the rally we have shows there are tremendous values at the appropriate times.

Again, the rally was significant but looking at equity prices, it sure didn't feel "significant" after all the losses. One thing is certain. The equity markets will continue to be volatile and economic recovery projections (the ones I've read over the weekend) are still about a year away at the earliest. After over 4 years in this stock, it is depressing to see the current state of the stock even in this market. UT just failed to participate in the bull markets the last few years despite operating in the highest growth markets, having visionary CEOs/founders, and the contacts/relationships in Japan/China (Softbank/Son, Alibaba/Ma, etc). I continue to hold out hope that someone in that management/BOD can salvage/utilize the remaining resources to create a profitable/growing company that will yield good results for shareholders still remaining. If it doesn't happen, then hopefully, some shareholders will find the share price low enough to force management/BOD to act.

Have a good rest of the Thanksgiving weekend.