Tuesday, September 1, 2009

ZTE win in Anhui, China

"Reportedly, this award is for 300,000 IPTV lines, to be deployed over 17 cities and counties in the province. It will provide comprehensive Internet TV services including direct cast, video-on-demand, time-shift, and value-add. Huawei, ZTE, and UTStarcom bidded on the contract. Eventually, ZTE won."


There hasn't been a lot of news regarding UT but the above win by ZTE over UT is a concern prompting cries of selling out the company.

Chinese shareholder Techbroker stated last year in a note to management:

"....Ironically, IPTV's boom day in China is likely UTStarcom's doom day -- We have two too aggressive, too successful and competitive, and too big competitors waiting out there for the same day too. They will offer zero or negative bet price to get you out of the business if they see the booming day is coming...."

Today, Tech states: "This latest serves a wake-up call to Blackmore and the Board: UT's last and only hope is finally gone now."

Is it???

Here is what Blackmore mentioned in the last CC:

"Our IP TV wins during the quarter include expansion contracts with China Telecom across a broad range of provinces, which include Fujian, Hainan, Shenzhen, and Shanghai. A partnership with CCTV also enabled China Telecom's first IPTV deployment in Hunan."

So, it is not cut and dry that ZTE can just muscle them and win all the contracts in iptv.
UT did $80m in core revenue in Q2 and bookings were tracking well. The Q2 bookings was the same as Q1 revenues if you subtract the Korean handset but since Q1 had some more PAS, the core part is improving.

I'm surprised with the 300k line deployment contract in Anhui since that shows even with the focus on 3G, iptv is picking up. IPTV is something the comapany will fight to defend. If they have to tweak their pricing a little bit, this would be worth it.

After all, their OPEX/quarter is not $130m or $60m but going to be under $25m.

Blackmore adds:

"Let me now turn to bookings. In the second quarter we continued to see good demand for our IP systems business in our target markets, and I'll discuss some wins in a moment. Based on our sales pipeline for the balance of 2009, we continued to expect to have good booking levels in the second half of the year."

I'll end this post with an earlier post on yahoo today,

On an earlier post this year, I brushed aside Shadow's and Coach's call for "more information" saying they needed to slash and burn. They have done the slash and burn. They also say they are focusing now on earnings and higher margins (hence letting go of handsets and not going after every broadband tender out there).

However, this loss to ZTE on iptv is critical and we definitely need information regarding this. IPTV is UTs higher margin product that they have put their hopes on. Is ZTE going for the kill and severely underpricing UT, in which case the board has to do a major about face regarding operating the company and looking for an exit point. Or did they just lose this by a few % points and the market reinforces the potential of IPTV in China. Only the company knows this.

As for having no choice but to sell out, thats not true. They have 2000 employees still after the restructuring. Others have much less (look at a Sonus for ex. at under 1000) I'm not making a case that this is a good thing (for them to keep restructuring if the revenue doesn't come in). Just that if you are playing this for a buyout, it might not happen soon. It does tip the balance more on the sell out option rather than the operational route (which some institutions are already grumbling for.....)

One thing on the building.. I am FOR selling it of course but that may be more of an indication that the company continues to operate the business than selling out completely.

Have a good day.