Saturday, January 24, 2009

Weekly Recap - Retesting lows?

The stock closed at $1.5, losing 9 cents or 5.7%. The markets were also down with the DOW, S&P, and Nasdaq losing 2.5, 2, and 3.4% respectively. The stock volume was down to the 200k level last week and the stock down another 19% this year alone. There has been no news from the company since the restructuring announcement. I did a quick scan of some websites/message board for related news.

Lu interview - Sharholder Techbroker posted the link to Lu's interview.

My initial comment: The success of PAS gave UT so much funds that they invested in various MAJOR projects from end to end iptv solution to 3G (total package - see above components) and even to the convergence of mobile, broadband, and fixed line, etc, etc. They have abandoned the WCDMA specific 3G products but have retained core parts to build new products/components for TDSCDMA such as softswitch (thats what I read into the Lu interview). Currently, they are focused on the terminals and iptv/broadband/ngn but not necessarily the mobile/wireless segment. But now that licenses have been issued, they can better focus their tech advantages to build new products aside from just terminals/handsets.

In the interview, it looks like Just in Time is using UT's Rolling Stream iptv solution.

Inida Mobile/broadband growth - India's mobile operators activated a staggering 10.81 million new lines during December 2008, taking the total number of wireless connections in the country to 346.89 million at the end of last year, according to new figures from the Telecom Regulatory Authority of India (TRAI) .

The country's fixed line base continues to shrink, though: The number of fixed line connections in India fell by 150,000 during December 2008, finishing the year at 37.9 million. The number of fixed broadband connections grew, though, by 170,000 to 5.45 million.

Aksh Interview - Good interview regarding iptv developments.

China IPTV policy breakthroughs - The Chinese IPTV market will see a number of further policy breakthroughs in 2009, according to Chinese consultancy firm CCID Consulting, following a rapid growth in the number of IPTV subscribers during 2008, when the number shot up 100% year-one-year.

The promotion of free and bundling marketing by operators has meant that IPTV subscribers have appeared in Shanghai, Zhejiang, Fujian and Guangdong, according to CCID Consulting, with around 700,000 subscribers in Shanghai alone at the end of last year. The consulting firm adds that the rapid subscriber growth has driven the development of the IPTV equipment market, although many telecom operators have found it difficult to make a profit from IPTV, with many promotions remaining at the free and low price promotion stage.

Microsoft IPTV in China Cable - Microsoft recorded three IPTV firsts today: the first cable operator customer for its Mediaroom platform; the breakthrough into the TV-over-broadband market in China; and the first deployment of the new Anytime capabilities that were announced last week at 2009 International CES in Las Vegas. (See Microsoft's Promise: TV Anytime You Want It.)

While UT disclosed it won a cable customer in China for their iptv system, this Microsoft news shows the technology lead that UT has built over the last few years has eroded.

From the above links/information, there are obvious positives to the markets for UT products but also heavy competition for the few growth areas in today's recessionary environment. The heavy investments that UT was able to make due to their success in PAS in iptv, 3G, broadband/ngn, etc has not brought signficiant revenue and has led to losses the last 4 years. There is no doubt that they still retain good technology, maintained/grown tier 1/2 operators, and positioned themselves for growth. The balance sheet is good enough to weather this recession but expenses that have been significantly reduced are still high compared to expected revenues. At a certain point, they cannot cut more without having their competition over-run them and that will be the end game. At a certain point, they have to show significant growth that will get them to profitability. Judging from Lu's inteview and management's "optimism" over the last year or two, they still believe they are a major player and can be competitive/successful. The stock/markets don't reflect that confidence.

For me personally, at this stage, there is little to lose ($1.5 shareprice/market cap under net cash) and am rolling the dice that the valuation is ridiculous for what the company has invested, their current cash/technology/assets/markets/contracts/position. I guess thats better than investing in some of these banks :-) BTW, it looks like the markets are hanging near the November lows but holding so far (Dow was in the high 7k range all last week). With the negative headline news regarding layoffs, bank failures, etc, it seems only a matter of time that the lows will have to be tested.

Have a good weekend everyone.