Just some random thoughts on misc. topics.
Palm - Lets look at some numbers from Palm compared to UT. Palm is projected to lose $2.02/share and 71 cents/share compared to UTs $1.25 and 0.52/share losses. Tangible assets for Palm is negative $631m compared to a postive $466m. Palm market cap is $873m compared to $87m for UT. Palm just raised another $103m to make up for their 90m loss last quarter. It looks like their Pre phone will be a hit but will not result in a profitable company. UT competes with Huawei and ZTE while Palm competes with RIMM and Apple.
Palm stock hit a low of $1.14/share but has recovered to the the $8-9 level. Palm has about 38% of their shares short so there is no shortage of people betting they are overvalued. The main difference the last few months is the street's perception that Palm is on the mend while UT continues with business as usual. This has resulted with Palm getting a couple of hundred million more from an investor while UT institutional investors are mostly selling the stock even at these "low" prices.
ZTE - says it has secured a $15 billion line of credit from China Development Bank. http://www.lightreading.com/document.asp?doc_id=173930&
ZTE (Shenzhen: 000063; Hong Kong: 0763) defied the economic downturn in 2008 with a 27.4 percent increase in annual revenues to 44.3 billion Yuan Renminbi ($6.5 billion) and a near 33 percent rise in net profit to RMB1.66 billion ($243 million). (See ZTE Reports 2008.)
http://www.lightreading.com/document.asp?doc_id=173864&
"Competitive and pricing pressure hit ZTE's infrastructure margins, though. In 2008, the gross margin on carrier network equipment sales was 35.8 percent, down from 39.6 percent in 2007.
But the gross margin for handset sales improved slightly, to 23.7 percent from 21.7 percent a year earlier, while the margin from software and services jumped to 30.3 percent from 16.7 percent in 2007. ZTE's overall gross margin for 2008 was 32.5 percent, down slightly from 2007's 32.7 percent.
ZTE ended 2008 with cash and cash equivalents of RMB11.3 billion ($1.66 billion)."
The last couple of articles shows the resources ZTE has and their progress the last couple of years. Its interesting to note the high margins from handsets that they get. One has to wonder if this is due to efficient operations and/or advantages to the large volumes. This is a "none-core" area for UT that management has to decide whether to compete in or choose to back away from. This is another tempting market specially with their "experience" in PAS/PCD but if its going to take years and years to generate any decent revenue, then why bother?
It also looks like ZTE actually makes money and has decent companywide gross margins. If they are giving away their equipment as some have suggested, how do they achieve their positive operating margins? This is another data point suggesting how inefficient UT is and how the management/operations are nowhere near their competitor's.
Cisco/SUN/IBM - Cisco buys Pure Digital for $590m and IBM is looking into SUN for about $8.5b or so. The large tech companies have a lot of cash and face the same stagnant world economy. It is natural that M&A will pick up. Shareholders in UT have speculated for years why it has not been bought out. It could be their products are not really that good or that Lu/board are not really serious in any M&A and just want the status quo. At these levels, shareholders do have the added "hope" it may really be too low for the competitors to ignore (such as in SUNs case).
Starent - Starent is growing and has a $1.2b market cap. Its revenues are in the $300m+ level and is being sued by UT. Back in 2003-2004, there was already talk of PAS peaking and the move by the company to diversify into other products. UT bought 3com's comworks division, which eventually yielded workers to form Starent. With all of UTs resources and products that it has developed, why could UT not produce "something" as successful as Starent did? All of the hundreds of millions the company has spent in R&D over the years have yielded little.
Blackmore - UT CEO has been with the company almost 2 years now. His contract (signed a few months before the stock markets peaked) was a hefty $750k/year with huge incentives and bonuses. Peter did convert the bonus into shares at $3.2 showing he too was intrigued by the US listing/management and China manufacturing combination like most shareholders. Peter was brought in to make the company a first class operating company (his words basically). Peter used the traditional outsourcing, more efficient supply chains, cuts, and others to reduce costs while waiting for revenues to ramp. His presence gave investors "hope" that he can turn around the company, make it focus and profitable. I really like Peter because he brought an operational background that shareholders felt was needed at the time (since the technology/revenues were not the main issues at the time).
At this juncture however, I have to bring up the question of whether Peter is still the right person for the job just as the company pondered whether Barton was really the right person for his job (don't really want to discuss Barton as it I could go on and on...again and makes my blood boil). There has always been the issue of who is in control with the founder Hong Lu still around. Why should shareholders pay two people CEO salaries/compensation fit for successful companies/much larger companies in a totally different era? At the very least, both Lu and Blackmore have to significantly reduce their compensations. Frankly, I don't care Blackmore has his contract (we can see what those contracts that AIG bonuses are based on). There should be a renegotiation on his contract. Period.
There is also the fundamental issues of Peter being a CEO. A CEO realizes the importance of the share price and growing the business. I'm not sure how many CEOs survive the job presiding over massive operating losses and share price losses of this magnitude. Also, if the company is done with the major cost cuts/operational issues, what is Peter's role? We know he has not been able to generate any meaningful revenue growth. He is a non-Chinese leading mainly Chinese executives and still their main/core market is China. He is not a marketing person either. I'm not advocating removing Peter because I don't think it could afford to pay him to leave either. Again, as a start, his salary/compensation have to be re-evaluated.
Executive search firm/compensation advisors - Do these firms have a clue on what they are doing? When an individual shareholder can see things are getting ridiculous and the board still continues with ridiculous behavior, one has to question the competency and/or agenda of the board. Why does this company have a heavily compensated non-Chinese CEO? Why is the board made up of non-Chinese (except for the founder who is bent on keeping control of the company at all costs) that have basically no "skin" in the game. Put a board with actual stakeholders and you'll see a difference in stock performance. Period.
I've talked with institutional holders over the last year and all are not "activists". Most are now waiting for some other institution to lead the way even though everyone is disappointed in the performance of the company/share price (what a shock). Anyway, I hear that there seems to be more serious discussions on actions from the company now that the stock is well below $1 (Really?).
At this stage, after watching the company for the last 4 years, I am indifferent from inaction or any appeasement actions from the company. We've seen that the company is not only one step behind but 3 or 4. Thats why every "positive" step they have taken has not yielded higher shareholder value or led the company closer to breakeven.
My biggest hope now is that there is action from institutional holders that all disappointed shareholders can rally behind and finally rid this company of people that don't produce any value for shareholders.
Have a good week everyone.
Sunday, March 22, 2009
Wednesday, March 18, 2009
Failure of the BOD
Why is the current board still in control of this company? If there was a "stress test" for determining competency of the board, how do you think the UT board would score?
Lets forget for a moment the $800m+ of losses retained on the books, the 4 years of continued operating losses, the musical chairs of management, showering management with mega salaries, bonuses, retention/exit compensations, and the sub $1 stock price (down 90+%), etc etc.
Coming into the worse recession since the 1930s depression, what budget plan did they sign off on for 2009. Continued losses of $10m, 50m, 100m.....NO, They "approved" losses of $150m or more. Are you kidding me? Some investors (sorry Shadow) say the company knows much more than the shareholders. Again, are you kidding me?
Here is part of the reply of the company for the all the emails sent last week: "We would remind you that we have been very active in the last 18 months.We defined the core products and have divested or initiated the wind down of all the non core businesses - a process that we expect to complete by July 2009; we have improved our net cash position from $180mat Dec 2007 to $314m at Dec 2008 and we currently have no debt."
Every year, the company trumpets their "accomplishments" rather than face the tremendous destruction of shareholder value. Last year, they mentioned the payment of the convertible bond, the sale of Gemdale/infinera, the completion of all the filings, the opex cuts, the resolution of certain material weakness, the repatriation of funds from China. The result of all of these accomplishments - further declines in the shareholder value (both tangible book value and actual share price) and going farther from breakeven.
So, excuse me for taking any of their "accomplishments" and efforts with a grain of salt. The bottom line is shareholders are faced with a stock that is about 1/5th of the tangible book value and about 1/3 of the cash.
The current opex target of $60m at the end of the year is simply undefensible. How much should they spend in Brazil, Taiwan, India, Russia, Latin America, and on and on if the returns are so minimal. They have the technology (as they have mentioned) but the markets are not ready. Why put in more money until you see some developments?
Sigma Designs has quarterly R&D of $3m+. UT had been maintaining an R&D of over $40m for quarter after quarter. When asked last year if they would develop their chip to be compatible to the China standard media processor, they responded that they will not spend the money until there is a clear standard developed. Sigma competes with Broadcom so its not impossible to be profitable competing against larger companies.
Sonus has revenues that are 1/3 to 1/2 UT and they are cutting costs to break even. Their valuation is atleast tangible book value.
So, even after years and years of losses, the plan for 2009 is even MORE losses and degradation of the stock price.
I hate to be so negative but every shareholder I have talked with can see that their cost is extremely high and that the board is non-existent. Again, why even have a board if this is the kind of shareholder destruction they have presided over?
It amazes me when I see other shareholders campaign against the board (like Bill Ackman going for 5 board seats in Target). I don't follow Target but I'm sure there are not many other companies that are not basically nationalized run worse or governed as poor as UT. The board simply has not done their duty to look after shareholder's interest and its time for them to go. I encourage shareholders to write the company expressing their opinions. Yes, we don't know the inside information but to believe the board can enhance shareholder value better than shareholders is ridiculous to say the least.
Lets forget for a moment the $800m+ of losses retained on the books, the 4 years of continued operating losses, the musical chairs of management, showering management with mega salaries, bonuses, retention/exit compensations, and the sub $1 stock price (down 90+%), etc etc.
Coming into the worse recession since the 1930s depression, what budget plan did they sign off on for 2009. Continued losses of $10m, 50m, 100m.....NO, They "approved" losses of $150m or more. Are you kidding me? Some investors (sorry Shadow) say the company knows much more than the shareholders. Again, are you kidding me?
Here is part of the reply of the company for the all the emails sent last week: "We would remind you that we have been very active in the last 18 months.We defined the core products and have divested or initiated the wind down of all the non core businesses - a process that we expect to complete by July 2009; we have improved our net cash position from $180mat Dec 2007 to $314m at Dec 2008 and we currently have no debt."
Every year, the company trumpets their "accomplishments" rather than face the tremendous destruction of shareholder value. Last year, they mentioned the payment of the convertible bond, the sale of Gemdale/infinera, the completion of all the filings, the opex cuts, the resolution of certain material weakness, the repatriation of funds from China. The result of all of these accomplishments - further declines in the shareholder value (both tangible book value and actual share price) and going farther from breakeven.
So, excuse me for taking any of their "accomplishments" and efforts with a grain of salt. The bottom line is shareholders are faced with a stock that is about 1/5th of the tangible book value and about 1/3 of the cash.
The current opex target of $60m at the end of the year is simply undefensible. How much should they spend in Brazil, Taiwan, India, Russia, Latin America, and on and on if the returns are so minimal. They have the technology (as they have mentioned) but the markets are not ready. Why put in more money until you see some developments?
Sigma Designs has quarterly R&D of $3m+. UT had been maintaining an R&D of over $40m for quarter after quarter. When asked last year if they would develop their chip to be compatible to the China standard media processor, they responded that they will not spend the money until there is a clear standard developed. Sigma competes with Broadcom so its not impossible to be profitable competing against larger companies.
Sonus has revenues that are 1/3 to 1/2 UT and they are cutting costs to break even. Their valuation is atleast tangible book value.
So, even after years and years of losses, the plan for 2009 is even MORE losses and degradation of the stock price.
I hate to be so negative but every shareholder I have talked with can see that their cost is extremely high and that the board is non-existent. Again, why even have a board if this is the kind of shareholder destruction they have presided over?
It amazes me when I see other shareholders campaign against the board (like Bill Ackman going for 5 board seats in Target). I don't follow Target but I'm sure there are not many other companies that are not basically nationalized run worse or governed as poor as UT. The board simply has not done their duty to look after shareholder's interest and its time for them to go. I encourage shareholders to write the company expressing their opinions. Yes, we don't know the inside information but to believe the board can enhance shareholder value better than shareholders is ridiculous to say the least.
Saturday, March 14, 2009
Late stage collapse or Early stage recovery?
The monumental collapse of the stock price to 70 cents indicates the company is reaching its final days. It was hard to imagine going lower from the $2 range early last year but a drop to 70 cents is still another significant leg down.
Fellow shareholder Techbroker has been following the company's operations in China closely and posted the culture that led to the company's success and eventual downfall. He writes today:
"Although it was written in 2006, the article possibly gives the best answers in regarding why UT is a failed company, and why Huawei does otherwise. The author did an excellent job in providing objective analysis of UT's culture, management, and history.
In short, UT is the worst managed company (if these is a word 'management' in the company in author's words) in the industry. On the other hand, Huawei spent TWO critical, difficult, and painful years working on its management during the late 1990s. UT realized the problem around the same time (around 2000), but the issue has never got improved, if not worse.
At the end, the author says that it might be a little early to claim that UT is a failed company, although many people in the industry think so then. It might be true that it was a little too early to claim UT is a dead company in 2006. However, it might be a little over due to announce that this company is doom to fail in 2009."
Here is the translation of the article.
http://translate.google.com/translate?prev=_t&hl=en&ie=UTF-8&u=http%3A%2F%2Finfo.china.alibaba.com%2Fnews%2Fdetail%2Fv5003013-d5746465.html&sl=zh-CN&tl=en&history_state0=
My posting last night regarding the balance sheet was a reflection of the street's valuation on the company as it continues to lose money. While it is an explanation of the current valuation of the company, it doesn't paint an accurate picture of the potential valuation of the company to an acquirer. It also doesn't represent an accurate picture of the potential valuation of the company if it can execute like all long term investors had hoped. As a balance to the negative 2006 article, I will repost a October 2008 article documenting an interview with Manish Matta, senior director of marketing at UTStarcom.
http://asia.tmcnet.com/topics/india/articles/44293-utstarcom-discusses-indias-growing-broadband-market.htm
"Also, the issue in India is not technology, but lack of consumer awareness of the benefits and applications enabled by broadband. Consumers are increasingly becoming aware of the applications that can be enabled by broadband. At UTStarcom, we are providing leading edge applications via broadband. For instance, UTStarcom was the first to launch IPTV in India and today we have deployed 4 out of the 5 commercial IPTV contracts in India. IPTV is being enabled over broadband network and UTStarcom remains agnostic to the type of access technology that the operator may have deployed. However, we strongly believe that applications like IPTV, which enable personalization, interactive services and social networking for consumers, will drive the demand for broadband. Broadband users in India will exceed 300 million users in the next decade and we are currently at the tipping point of the growth phase."
MM: Our customers work with us primarily for three reasons: our focus on technology innovation, our solution vision and our culture. Let me elaborate a bit on each.
UTStarcom’s DNA is “technology innovation” - our customers, which include various Tier 1 and Tier 2 service providers globally, look upon us to provide cost-effective multimedia solutions and applications that will continually improve how people interact and communicate. Living up to our motto of providing “A World of Better Communication,” UTStarcom has led the market with technology innovations that have revolutionized customer experience. UTStarcom has been the first to market with technologies like IPDSLAM, GEPON and most recently IPTV which have all changed the way people communicate and interact. The focus has been on providing applications that are adapting to the changing needs of the consumers. IPTV has potential to completely change India’s communication landscape as it provides a host of new IP-based value add applications like video calling, digital signage, distance learning, social networking and IP surveillance, amongst others, besides broadcast TV, time-shift TV, VOD (video on demand), etc. UTStarcom was the first to market with IPTV in India and currently provides IPTV solutions to customers like Aksh, MTNL, BSNL (News - Alert), Bharti and UTL in India.
The second reason stated is our solution vision and focus. As a company, we focus on three key areas – Broadband, Next Generation Networks (News - Alert) (NGN) and IPTV. Each of these can be highly complicated and cost intensive for our customers, the service providers. To ease the burden, we have focused our development efforts on ensuring a seamless interworking of all our solutions in Broadband, NGN and IPTV. The network management system (NMS), back end systems (BES) and the operations support systems (OSS) are designed to work together such that we can enable services like remote configuration, integrated billing, etc. for all our customers for all our solutions. So our customers who deploy and provision multiple solutions from UTStarcom inherently benefit from a significant operating cost (OPEX) reduction which is a recurring saving.
The third reason is our culture. “Customer Focus” is one of the integral core values for UTStarcom. Our success inherently lies in the success of our customers. We do not vie for every opportunity in the markets we address – we have a cross functional evaluation team that scrutinizes every opportunity to ensure some key metrics are met before taking on new customers and/or opportunities. Our stated objective is to work with a limited number of significant opportunities in each region so that we are able to satisfy the demands of each of our customers. Once the project is accepted, we work with our customer to deliver the applications and services that can help them differentiate their services in a cost effective manner. This sets us apart from others.
MM: UTStarcom has been a leader in broadband for two years running, and we are now clear leaders in IPTV as well. As industry leaders in BB and IPTV, not only do we have the largest market share, but we consider it our responsibility to help the market grow, and act as a catalyst for growth of both BB and IPTV. We hope to maintain this leadership position, and will work closely with different service providers to drive adoption of both BB and IPTV in the country. Our aim would be to deliver the benefits of IPTV to the country and help bridge the digital divide by making TV as an information and product tool apart from providing superior form of entertainment. We hope to leverage on our global leadership in SoftSwitch and NGN to establish similar position of leadership in India for SoftSwitch.
We are also working to increase India’s contribution to the global operations of UTStarcom. For example we already have extension of our Global R&D team of BB based in Gurgaon, India, and the Escalation Centre for Asia Pacific is also based out of Gurgaon. This year we have established Centre of Excellence for IPTV in Gurgaon, India, and over the coming years we hope to contribute more to the global IPTV product line of UTStarcom from India.
Techbroker's article shows the disarray and inefficiencies that the company has had up to 2006. The company has continued losses the following years and the balance sheet has deteriorated further. PAS sales is down to $19m/quarter and losses in India (despite the market share gains and leadership position) have further reduced confidence in the company. The Indian article does show a small (and I emphasize small) glimmer of hope. The market will eventually decide if this is the late stage of collapse or the early stage of recovery. I am only an individual investor that see substantially more value at this stage seeing the company broken up or sold. I could also see the potential for an even higher valuation if there is a full turnaround. However, at the present time, the company has not defended the stock or provided any tangible reason to think that the current valuation is incorrect.
Fellow shareholder Techbroker has been following the company's operations in China closely and posted the culture that led to the company's success and eventual downfall. He writes today:
"Although it was written in 2006, the article possibly gives the best answers in regarding why UT is a failed company, and why Huawei does otherwise. The author did an excellent job in providing objective analysis of UT's culture, management, and history.
In short, UT is the worst managed company (if these is a word 'management' in the company in author's words) in the industry. On the other hand, Huawei spent TWO critical, difficult, and painful years working on its management during the late 1990s. UT realized the problem around the same time (around 2000), but the issue has never got improved, if not worse.
At the end, the author says that it might be a little early to claim that UT is a failed company, although many people in the industry think so then. It might be true that it was a little too early to claim UT is a dead company in 2006. However, it might be a little over due to announce that this company is doom to fail in 2009."
Here is the translation of the article.
http://translate.google.com/translate?prev=_t&hl=en&ie=UTF-8&u=http%3A%2F%2Finfo.china.alibaba.com%2Fnews%2Fdetail%2Fv5003013-d5746465.html&sl=zh-CN&tl=en&history_state0=
My posting last night regarding the balance sheet was a reflection of the street's valuation on the company as it continues to lose money. While it is an explanation of the current valuation of the company, it doesn't paint an accurate picture of the potential valuation of the company to an acquirer. It also doesn't represent an accurate picture of the potential valuation of the company if it can execute like all long term investors had hoped. As a balance to the negative 2006 article, I will repost a October 2008 article documenting an interview with Manish Matta, senior director of marketing at UTStarcom.
http://asia.tmcnet.com/topics/india/articles/44293-utstarcom-discusses-indias-growing-broadband-market.htm
"Also, the issue in India is not technology, but lack of consumer awareness of the benefits and applications enabled by broadband. Consumers are increasingly becoming aware of the applications that can be enabled by broadband. At UTStarcom, we are providing leading edge applications via broadband. For instance, UTStarcom was the first to launch IPTV in India and today we have deployed 4 out of the 5 commercial IPTV contracts in India. IPTV is being enabled over broadband network and UTStarcom remains agnostic to the type of access technology that the operator may have deployed. However, we strongly believe that applications like IPTV, which enable personalization, interactive services and social networking for consumers, will drive the demand for broadband. Broadband users in India will exceed 300 million users in the next decade and we are currently at the tipping point of the growth phase."
MM: Our customers work with us primarily for three reasons: our focus on technology innovation, our solution vision and our culture. Let me elaborate a bit on each.
UTStarcom’s DNA is “technology innovation” - our customers, which include various Tier 1 and Tier 2 service providers globally, look upon us to provide cost-effective multimedia solutions and applications that will continually improve how people interact and communicate. Living up to our motto of providing “A World of Better Communication,” UTStarcom has led the market with technology innovations that have revolutionized customer experience. UTStarcom has been the first to market with technologies like IPDSLAM, GEPON and most recently IPTV which have all changed the way people communicate and interact. The focus has been on providing applications that are adapting to the changing needs of the consumers. IPTV has potential to completely change India’s communication landscape as it provides a host of new IP-based value add applications like video calling, digital signage, distance learning, social networking and IP surveillance, amongst others, besides broadcast TV, time-shift TV, VOD (video on demand), etc. UTStarcom was the first to market with IPTV in India and currently provides IPTV solutions to customers like Aksh, MTNL, BSNL (News - Alert), Bharti and UTL in India.
The second reason stated is our solution vision and focus. As a company, we focus on three key areas – Broadband, Next Generation Networks (News - Alert) (NGN) and IPTV. Each of these can be highly complicated and cost intensive for our customers, the service providers. To ease the burden, we have focused our development efforts on ensuring a seamless interworking of all our solutions in Broadband, NGN and IPTV. The network management system (NMS), back end systems (BES) and the operations support systems (OSS) are designed to work together such that we can enable services like remote configuration, integrated billing, etc. for all our customers for all our solutions. So our customers who deploy and provision multiple solutions from UTStarcom inherently benefit from a significant operating cost (OPEX) reduction which is a recurring saving.
The third reason is our culture. “Customer Focus” is one of the integral core values for UTStarcom. Our success inherently lies in the success of our customers. We do not vie for every opportunity in the markets we address – we have a cross functional evaluation team that scrutinizes every opportunity to ensure some key metrics are met before taking on new customers and/or opportunities. Our stated objective is to work with a limited number of significant opportunities in each region so that we are able to satisfy the demands of each of our customers. Once the project is accepted, we work with our customer to deliver the applications and services that can help them differentiate their services in a cost effective manner. This sets us apart from others.
MM: UTStarcom has been a leader in broadband for two years running, and we are now clear leaders in IPTV as well. As industry leaders in BB and IPTV, not only do we have the largest market share, but we consider it our responsibility to help the market grow, and act as a catalyst for growth of both BB and IPTV. We hope to maintain this leadership position, and will work closely with different service providers to drive adoption of both BB and IPTV in the country. Our aim would be to deliver the benefits of IPTV to the country and help bridge the digital divide by making TV as an information and product tool apart from providing superior form of entertainment. We hope to leverage on our global leadership in SoftSwitch and NGN to establish similar position of leadership in India for SoftSwitch.
We are also working to increase India’s contribution to the global operations of UTStarcom. For example we already have extension of our Global R&D team of BB based in Gurgaon, India, and the Escalation Centre for Asia Pacific is also based out of Gurgaon. This year we have established Centre of Excellence for IPTV in Gurgaon, India, and over the coming years we hope to contribute more to the global IPTV product line of UTStarcom from India.
Techbroker's article shows the disarray and inefficiencies that the company has had up to 2006. The company has continued losses the following years and the balance sheet has deteriorated further. PAS sales is down to $19m/quarter and losses in India (despite the market share gains and leadership position) have further reduced confidence in the company. The Indian article does show a small (and I emphasize small) glimmer of hope. The market will eventually decide if this is the late stage of collapse or the early stage of recovery. I am only an individual investor that see substantially more value at this stage seeing the company broken up or sold. I could also see the potential for an even higher valuation if there is a full turnaround. However, at the present time, the company has not defended the stock or provided any tangible reason to think that the current valuation is incorrect.
Friday, March 13, 2009
Balance Sheet - Plan C?
The latest company summary balance sheet can be seen from this yahoo link:
http://finance.yahoo.com/q/bs?s=UTSI
Net tangible assets/shareholder equity has gone down to $466.8m, down from about $539m due to the restructuring costs/operating losses in the fourth quarter. Based on 124.8m shares, this works out to $3.74/share.
Year after year, the company's stated goal has been to return to sustainable profitability. The latest earnings report and projections for continued losses throughout this year, coupled with the major revenue shortfall has led to revised earnings projections from the street to $1.25/share and .52/share losses in 2009/2010 respectively. If we simply subtract this from the $3.74/share, we get $1.97/share.
Property/plant/equipment is on the books for $175m or $1.4/share. Lets say this is worthless at this stage. Subtracting this leads to 57 cents/share.
Without looking at other assets and liabilities, if the company stays at present course, the tangible book value (without property/plant/equipment) will be 57 cents/share. This quick evaluation is simplistic but nevertheless not very appealing to shareholders hoping for much higher prices.
The problem with our "hope" last year was the company's estimates to break even by early 2009 (via Blackmore's famous expense metrics target delivered in 2007) and the "hope" that the company can indeed ramp up several hundred million in revenue to bridge the profitability gap. Now, we know this is way off and not possible until sometime in 2010.
The above quick evaluation is the operating scenario. Here are the alternatives that could lead to a higher tangible valuation and hence share price.
Monetization of the real estate - How much is that asset really worth? Its not generating rental/lease income and there are upkeep costs so if the company can monetize this, that will lead to higher valuation, potentially say $100-150m, or $0.8/share to $1.25/share. This would be huge to say the least.
Retained "earnings" - $841.5m and counting in losses caried forward. To a profitable company that can offset those losses, it could be worth as much as 1/3 of that or $280.5m. I don't know the tax laws but its been mentioned this could be valuable to some other company.
R&D and SG&A expenditures - The company spent $26m on R&D and $46m on SG&A. This is down from the previous year of $40m & $76m. For the next two years (the time period with the expected losses), lets say they will spend atleast $180m on R&D and $160m on SG&A. Part of these expenditures could be eliminated by a much larger company that has overlapping business. Ericsson is spending $5b/year on R&D for the next 5 years and targets the same broadband, NGN, iptv markets. Huawei has revenues in the $15b range (Techbroker mentioned up to $30b but I can't confirm). Anyway, there should be substantial savings in terms of R&D and SG&A in a consolidation.
PCD retained performance money - The company could earn an additional $50m by the end of 2010. I am not sure how/if the company has reflected this under assets.
Competitors higher margins - Aside from the cost side, an even more appealing reason to acquire UT is to eliminate competition, gain market share and increase margins. Maybe, if the company was to sell itself, their customers who value them as a standalone company to keep prices low, might actually give them some profitable contracts....maybe)
Accounts payable - There is still $432.8m in accounts payable on the books. If UTs plan is to sell the company, it could use part of its $300m+ cash to pay part of this off early for a substantial discount, thereby increasing the tangible book value.
There are possibly other items that would boost UTs value to an acquirer rather than continue being an ongoing concern.
Of course, I would have rather had the company get to break even/be profitable and then look for a suitor but the continued losses and current stock price makes that possibility very much less likely.
A few years ago, Siebel sold out to Oracle for $5.85b. At the time, Siebel had a ton of cash as well and profitable but it was probably the best decision for the shareholders. Oracle also bought People Soft to get the customer base (although it paid a much higher premium).
The street obviously does not believe UT can turn around, be profitable and increase shareholder value via the operational route. Therefore, shareholders should engage management/board to really look at shareholder value. While the company has no debt, it has massive losses ahead of it and does not have the scale that their competitors have. What it has are tangible assets/benefits that could be unlocked at this stage that are multiples of what the current share price show.
Plan C - I have had plenty of discussions with other shareholders on cost cuts and every alternative out there but I think we may need to put incentives for the company to seek strategic alternatives at this stage. Hong Lu still has over 3m shares that were worth $18m just 8 months ago. Now, its barely above $2m. That should be incentive enough for him to seek a sale. For others, the employee stock option is at $3.26 so they will not get anything much if the sale price is not significantly higher than that. I don't have a specific incentive plan but at this stage and looking at continued losses and deterioration of the balance sheet, why not atleast work on incentive clauses for a sale of the company at certain price points.
This is another case where the company is worth more dead than alive. That is what the market is telling shareholders and the company. If you have not done so, please send a note to management reiterating your concern with shareholder value and the viability of the company going forward. This sense of urgency must come from shareholders at this stage.
Have a good weekend.
http://finance.yahoo.com/q/bs?s=UTSI
Net tangible assets/shareholder equity has gone down to $466.8m, down from about $539m due to the restructuring costs/operating losses in the fourth quarter. Based on 124.8m shares, this works out to $3.74/share.
Year after year, the company's stated goal has been to return to sustainable profitability. The latest earnings report and projections for continued losses throughout this year, coupled with the major revenue shortfall has led to revised earnings projections from the street to $1.25/share and .52/share losses in 2009/2010 respectively. If we simply subtract this from the $3.74/share, we get $1.97/share.
Property/plant/equipment is on the books for $175m or $1.4/share. Lets say this is worthless at this stage. Subtracting this leads to 57 cents/share.
Without looking at other assets and liabilities, if the company stays at present course, the tangible book value (without property/plant/equipment) will be 57 cents/share. This quick evaluation is simplistic but nevertheless not very appealing to shareholders hoping for much higher prices.
The problem with our "hope" last year was the company's estimates to break even by early 2009 (via Blackmore's famous expense metrics target delivered in 2007) and the "hope" that the company can indeed ramp up several hundred million in revenue to bridge the profitability gap. Now, we know this is way off and not possible until sometime in 2010.
The above quick evaluation is the operating scenario. Here are the alternatives that could lead to a higher tangible valuation and hence share price.
Monetization of the real estate - How much is that asset really worth? Its not generating rental/lease income and there are upkeep costs so if the company can monetize this, that will lead to higher valuation, potentially say $100-150m, or $0.8/share to $1.25/share. This would be huge to say the least.
Retained "earnings" - $841.5m and counting in losses caried forward. To a profitable company that can offset those losses, it could be worth as much as 1/3 of that or $280.5m. I don't know the tax laws but its been mentioned this could be valuable to some other company.
R&D and SG&A expenditures - The company spent $26m on R&D and $46m on SG&A. This is down from the previous year of $40m & $76m. For the next two years (the time period with the expected losses), lets say they will spend atleast $180m on R&D and $160m on SG&A. Part of these expenditures could be eliminated by a much larger company that has overlapping business. Ericsson is spending $5b/year on R&D for the next 5 years and targets the same broadband, NGN, iptv markets. Huawei has revenues in the $15b range (Techbroker mentioned up to $30b but I can't confirm). Anyway, there should be substantial savings in terms of R&D and SG&A in a consolidation.
PCD retained performance money - The company could earn an additional $50m by the end of 2010. I am not sure how/if the company has reflected this under assets.
Competitors higher margins - Aside from the cost side, an even more appealing reason to acquire UT is to eliminate competition, gain market share and increase margins. Maybe, if the company was to sell itself, their customers who value them as a standalone company to keep prices low, might actually give them some profitable contracts....maybe)
Accounts payable - There is still $432.8m in accounts payable on the books. If UTs plan is to sell the company, it could use part of its $300m+ cash to pay part of this off early for a substantial discount, thereby increasing the tangible book value.
There are possibly other items that would boost UTs value to an acquirer rather than continue being an ongoing concern.
Of course, I would have rather had the company get to break even/be profitable and then look for a suitor but the continued losses and current stock price makes that possibility very much less likely.
A few years ago, Siebel sold out to Oracle for $5.85b. At the time, Siebel had a ton of cash as well and profitable but it was probably the best decision for the shareholders. Oracle also bought People Soft to get the customer base (although it paid a much higher premium).
The street obviously does not believe UT can turn around, be profitable and increase shareholder value via the operational route. Therefore, shareholders should engage management/board to really look at shareholder value. While the company has no debt, it has massive losses ahead of it and does not have the scale that their competitors have. What it has are tangible assets/benefits that could be unlocked at this stage that are multiples of what the current share price show.
Plan C - I have had plenty of discussions with other shareholders on cost cuts and every alternative out there but I think we may need to put incentives for the company to seek strategic alternatives at this stage. Hong Lu still has over 3m shares that were worth $18m just 8 months ago. Now, its barely above $2m. That should be incentive enough for him to seek a sale. For others, the employee stock option is at $3.26 so they will not get anything much if the sale price is not significantly higher than that. I don't have a specific incentive plan but at this stage and looking at continued losses and deterioration of the balance sheet, why not atleast work on incentive clauses for a sale of the company at certain price points.
This is another case where the company is worth more dead than alive. That is what the market is telling shareholders and the company. If you have not done so, please send a note to management reiterating your concern with shareholder value and the viability of the company going forward. This sense of urgency must come from shareholders at this stage.
Have a good weekend.
Wednesday, March 11, 2009
Sense of Urgency
The markets have regained most of the losses last week and UT stock is down 2 cents so far this week after surffering a 31% decline last week. It seems that almost everyday, there is a company coming out and defending their stock. The only thing we've seen from UT are the insider (tax) sales at 70-93 cents! This is sickening for shareholders and a total lack of a sense of urgency from the company/management.
An updated "earnings" estimate for 2009 and 2010 (from yahoo) are for losses of $1.25/share and 52 cents/share respectively. Revenue is at $556m and $668m. And as we've seen, the company hasn't exactly been meeting expectations, no matter how low they are. In any case, is a company operating at a loss EVERY quarter since 2004 and projected to continue to at least 2010 even a viable business?
With still around $270m in cash after this current quarter's massive $50m loss (does this even bother the company anymore?) and a book value in the $4 range, it really is time for shareholders to demand action from the management/board now before the asset base is eroded further. Companies such as Ericsson have $5 Billion/year R&D budget and their competitors such as Huawei have revenues in the $15-20 Billion. How can UT compete at this stage? The board has not or cannot come up with ways to enhance or even preserve shareholder value. Is this not the time to demand an explanation from the board on why they are not doing their fudiciary duty to shareholders?
Today, I participated in a productive conference call with other shareholders and there will be action taken. However, I am writing tonight to ask all shareholders to send an email to management/board to demand action to address the stock price, their still enormous cost base, and lack of plans to get to profitability. A quick survey of the probable revenues and gross margins show at the minimum, they would have to cut expenses to $40m/quarter or lower, which is way below the company's target of $60m by Q4 this year. Shareholders need to demand a significant change in the way the company operates its business. If the company cannot or will not do it, then it means the business is really not viable and we need to face the sad reality of salvaging the remaining shareholder value.
If you are a current shareholder, I ask that you send an email to Peter Blackmore, Barry Hutton, and the board of directors indicating your frustrations and support/demand for change. Add the number of shares that you own and please copy me on the email.
peter.blackmore@utstar.com
barry.hutton@utstar.com
directors@utstar.com
My email is tim_94305@yahoo.com
Have a good evening.
PS. Last year, I had a list of about 75-80 people in the exploratory group. If you were not part of the group and want to be included in the email list, let me know as well.
An updated "earnings" estimate for 2009 and 2010 (from yahoo) are for losses of $1.25/share and 52 cents/share respectively. Revenue is at $556m and $668m. And as we've seen, the company hasn't exactly been meeting expectations, no matter how low they are. In any case, is a company operating at a loss EVERY quarter since 2004 and projected to continue to at least 2010 even a viable business?
With still around $270m in cash after this current quarter's massive $50m loss (does this even bother the company anymore?) and a book value in the $4 range, it really is time for shareholders to demand action from the management/board now before the asset base is eroded further. Companies such as Ericsson have $5 Billion/year R&D budget and their competitors such as Huawei have revenues in the $15-20 Billion. How can UT compete at this stage? The board has not or cannot come up with ways to enhance or even preserve shareholder value. Is this not the time to demand an explanation from the board on why they are not doing their fudiciary duty to shareholders?
Today, I participated in a productive conference call with other shareholders and there will be action taken. However, I am writing tonight to ask all shareholders to send an email to management/board to demand action to address the stock price, their still enormous cost base, and lack of plans to get to profitability. A quick survey of the probable revenues and gross margins show at the minimum, they would have to cut expenses to $40m/quarter or lower, which is way below the company's target of $60m by Q4 this year. Shareholders need to demand a significant change in the way the company operates its business. If the company cannot or will not do it, then it means the business is really not viable and we need to face the sad reality of salvaging the remaining shareholder value.
If you are a current shareholder, I ask that you send an email to Peter Blackmore, Barry Hutton, and the board of directors indicating your frustrations and support/demand for change. Add the number of shares that you own and please copy me on the email.
peter.blackmore@utstar.com
barry.hutton@utstar.com
directors@utstar.com
My email is tim_94305@yahoo.com
Have a good evening.
PS. Last year, I had a list of about 75-80 people in the exploratory group. If you were not part of the group and want to be included in the email list, let me know as well.
Saturday, March 7, 2009
Viability of the company - Plan B
The stock closed at 70 cents this week, and hit a low of 64 cents on Friday. Down another 62% this year to a market cap of less than $90m, the street is telling us this is not a viable business going forward. Lets look at some of the ugly numbers/facts.
1. The company is projecting revenues in the $120-130m for Q1 and a loss of $50m. For a company with a market cap less than $100m, that is staggering.
2. The company is projecting continued losses for atleast the next 4 quarters and is not projecting breakeven/profitability until 2010 at the earliest. Since 2004, they have been predicting profitability a year out.
3. S&P has a $1/share target price and Jefferies has an even lower $.75 target. S&P notes the company will probably lose $200m more in cash in 2009 bringing cash levels to the $125m at the end of the year, and hence their $1 price target.
4. Company head count is still over 4300 after this recent headcount reduction and opex at best will be down to the $60m by Q4 of 2009.
With the stock in the 60-70 cent range, the company has not come out and discussed the stock price or shown any sense of urgency. The cycle of cutting cost and being behind the curve doesn't seem to end. This is even more disturbing because of the current state of the world economy and their competitive position.
How can the company get to breakeven when they so far could not when they had much higher PAS sales, China markets were booming (stock market went from 1k to 6k), and competitors ZTE/Huawei were much smaller?
Management and the board could not turn the ship around and unfortunately for shareholders, it is up to us to salvage what is left. Should we continue to "hope" that they can turn it around and risk looking at a situation where their cash is below $100m, revenues even lower, and options much worse? At the current stock price, the street has already made up its mind. The company is not viable and we shareholders need to act now.
I first talked with Peter during the 2007 November shareholder meeting and discussed with the management/board the background of the failed strategic alternatives. Basically, the company could not find a buyer that would offer an acceptable amount for the entire company and have it close, citing the bad economic environment/real estate problems. It was bizarre because this was in late 2006/early 2007. But then again, who would buy it when they had all the filing/investigation issues ongoing and yet to be announced. The only viable revenue stream was PAS so essentially they were asking somebody to pay atleast $1.2b (lets say $10) for PCD and the technology. In any case, if they broke it apart even then, shareholders would have been better off with $10 or even $8 or $6.
Throughout 2008, the stock was already in the $2+ range so the issue was still can the company be competitive and get back to profitability. Management was very confident in achieving their expense metrics and increasing the revenue base despite repeated questions on the PAS decline. Barton had a "plan" for 2009 and beyond that supposedely took into account PAS declines and expenses would only be cut incrementally. It was always two steps forward and one step back for them. Barton was so important that his yearly compensation was around $3m! The board vehemently defended his salary to shareholders last March and a few months later he was gone.
The above is just a sample of events (and as I summarized for Blackmore last March), it goes way back to 2004 and Barton in 2005 with all the failed projections. Barton always insisted they "met" his projections quarterly. Yes, they did because after they met expectations for one quarter, they projected such a massive shortfall the next! Sound familiar?
Anyway, when I formed the "exploratory" group to enhance shareholder value, we had good traction at the beginning and the company was able to sell PCD, improve performance for a quarter (they actually announced exceeding estimates ahead), and the stock shot up to almost $6. While many called for "Plan B" at the time, we were operating under "Plan A" because that was most logical at that stage and most institutions were happy to see if the company can still turn around (some had just bought in the $2s and were obviously happy with the price increases). I myself was hoping that UT can atleast get to breakeven and negotiate a sale when the stock was much north of $5.
With the turn of events last year and material changes to the markets/world economy, and obviously with the stock price, those hopes are gone and we shareholders must now transition to "Plan B". I again reiterate my tremendous disappointment that we must do this. It ends my hopes that the company can turn it around but in order to maximize shareholder value at this stage....
With the help of other institutional holders, we are gathering the shareholders for discussions on how to proceed. We definitely want to meet with Peter and the board when he gets back from China (he has a two week trip plan).
To all the shareholders out there, I understand your pain and the institutions that are on board share your pain and we will try to do whats best for shareholder value, something unfortunately the management and board have failed all of us.
I end this post by asking for all of your support in the group. The retail shareholders make up a significant amount of the outstanding shares and your voice must be heard.
I can be reached at tim_94305@yahoo.com if you want to send a private message. Currently we are contacting institutions in the top 15 holdings but welcome any institutional holder that share our frustration.
Have a good weekend.
1. The company is projecting revenues in the $120-130m for Q1 and a loss of $50m. For a company with a market cap less than $100m, that is staggering.
2. The company is projecting continued losses for atleast the next 4 quarters and is not projecting breakeven/profitability until 2010 at the earliest. Since 2004, they have been predicting profitability a year out.
3. S&P has a $1/share target price and Jefferies has an even lower $.75 target. S&P notes the company will probably lose $200m more in cash in 2009 bringing cash levels to the $125m at the end of the year, and hence their $1 price target.
4. Company head count is still over 4300 after this recent headcount reduction and opex at best will be down to the $60m by Q4 of 2009.
With the stock in the 60-70 cent range, the company has not come out and discussed the stock price or shown any sense of urgency. The cycle of cutting cost and being behind the curve doesn't seem to end. This is even more disturbing because of the current state of the world economy and their competitive position.
How can the company get to breakeven when they so far could not when they had much higher PAS sales, China markets were booming (stock market went from 1k to 6k), and competitors ZTE/Huawei were much smaller?
Management and the board could not turn the ship around and unfortunately for shareholders, it is up to us to salvage what is left. Should we continue to "hope" that they can turn it around and risk looking at a situation where their cash is below $100m, revenues even lower, and options much worse? At the current stock price, the street has already made up its mind. The company is not viable and we shareholders need to act now.
I first talked with Peter during the 2007 November shareholder meeting and discussed with the management/board the background of the failed strategic alternatives. Basically, the company could not find a buyer that would offer an acceptable amount for the entire company and have it close, citing the bad economic environment/real estate problems. It was bizarre because this was in late 2006/early 2007. But then again, who would buy it when they had all the filing/investigation issues ongoing and yet to be announced. The only viable revenue stream was PAS so essentially they were asking somebody to pay atleast $1.2b (lets say $10) for PCD and the technology. In any case, if they broke it apart even then, shareholders would have been better off with $10 or even $8 or $6.
Throughout 2008, the stock was already in the $2+ range so the issue was still can the company be competitive and get back to profitability. Management was very confident in achieving their expense metrics and increasing the revenue base despite repeated questions on the PAS decline. Barton had a "plan" for 2009 and beyond that supposedely took into account PAS declines and expenses would only be cut incrementally. It was always two steps forward and one step back for them. Barton was so important that his yearly compensation was around $3m! The board vehemently defended his salary to shareholders last March and a few months later he was gone.
The above is just a sample of events (and as I summarized for Blackmore last March), it goes way back to 2004 and Barton in 2005 with all the failed projections. Barton always insisted they "met" his projections quarterly. Yes, they did because after they met expectations for one quarter, they projected such a massive shortfall the next! Sound familiar?
Anyway, when I formed the "exploratory" group to enhance shareholder value, we had good traction at the beginning and the company was able to sell PCD, improve performance for a quarter (they actually announced exceeding estimates ahead), and the stock shot up to almost $6. While many called for "Plan B" at the time, we were operating under "Plan A" because that was most logical at that stage and most institutions were happy to see if the company can still turn around (some had just bought in the $2s and were obviously happy with the price increases). I myself was hoping that UT can atleast get to breakeven and negotiate a sale when the stock was much north of $5.
With the turn of events last year and material changes to the markets/world economy, and obviously with the stock price, those hopes are gone and we shareholders must now transition to "Plan B". I again reiterate my tremendous disappointment that we must do this. It ends my hopes that the company can turn it around but in order to maximize shareholder value at this stage....
With the help of other institutional holders, we are gathering the shareholders for discussions on how to proceed. We definitely want to meet with Peter and the board when he gets back from China (he has a two week trip plan).
To all the shareholders out there, I understand your pain and the institutions that are on board share your pain and we will try to do whats best for shareholder value, something unfortunately the management and board have failed all of us.
I end this post by asking for all of your support in the group. The retail shareholders make up a significant amount of the outstanding shares and your voice must be heard.
I can be reached at tim_94305@yahoo.com if you want to send a private message. Currently we are contacting institutions in the top 15 holdings but welcome any institutional holder that share our frustration.
Have a good weekend.
Saturday, February 21, 2009
Weekly Recap - Another All-time Low Closing
The stock closed at $1.17, down 68 cents or 37% for the year. The stock is down about 90% from the highs the last couple of years and about 97% over the last 5-years.
Here are the related news over the last few weeks. Thanks to Tigre, Shadow, Techbroker and others that have continued to post.
PAS end of the road? - "According to Sina, the government in recent days have also ordered operators of services using the 1900-1920 MHz frequency band (that's PAS) to stop network expansion and adding new subscribers."
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_U/threadview?m=tm&bn=27187&tid=157210&mid=157210&tof=49&frt=1
Gepon in China - "Chinese telecom equipment manufacturers Huawei and ZTE (763.HK, 000063.SZ) have won first-round equipment bidding for China Telecom's (NYSE:CHA, 728.HK) gigabit passive optical network (GPON) 2300, reports Communications Weekly. Fiberhome Telecommunication Technologies (600498.SH) and Alcatel Shanghai Bell also shared the bidding. The manufacturers will provide the equipment to China Telecom for free, said an unnamed source. China Telecom plans to trial GPON 2300 in Beijing, Shanghai, Wuhan and Hangzhou." http://www.jlmpacificepoch.com/newsstories?id=141056_0_5_0_M
Good discussion on the boards regarding this news. http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_U/threadview?m=tm&bn=27187&tid=157323&mid=157323&tof=15&rt=1&frt=1&off=1
This is a relatively small trial (hence the free equipment) but nevertheless would like to see UT involved in trials/deployments. UT has previously mentioned winning small contracts in Gepon in China but at this stage it is still small.
Broadband/IPTV in Russia - Fixed-line growth, driven by demand for broadband and IPTV services, will help fuel Russia's telecom services market expansion from $37.2 billion in 2008 to $48.5 billion in 2013, according to a new Pyramid Research report, "Communications Markets in Russia." http://www.lightreading.com/document.asp?doc_id=172392
Still waiting for UT developments in Russia.
UT iptv win - (translated) The tender was finalized before the Spring Festival, UT Starcom to become the project's platform and terminal equipment provider, and the South together with the media for the city of Canton 800,000 cable provides the platform and equipment. 其互动电视业务将与广东的省网现有单向数字电视业务紧密关联。 Its interactive television business will be with the Guangdong provincial network of existing one-way digital TV business closely related. 互动电视业务建立在单向数字电视业务基础上，依托同一HFC网络进行传输。 Interactive TV business set up in a one-way digital television business, based on relying on the same HFC networks. 而双向机顶盒需同时承载互动电视业务和单向数字电视业务。 And two-way set-top box is required to carry a one-way interactive television services and digital television business.
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_U/threadview?m=tm&bn=27187&tid=157323&mid=157326&tof=15&rt=1&frt=1&off=1
Tigre's commentary: As Techbroker commented, this is a good strategic win for UTSI but probably not financially very rewarding. It's great that UTSI carve out a share of a tier-one city that was thought to be Huawei's, and likely defeated ZTE in the bidding. It's just as significant to gain an important partner in Southern Media, to expand beyond existing partnership with SMG. And it wins a chance to showcase the relevance of its IPTV technology as applied to cable, going beyond its traditional application in telecom. Even though it is 2-3 years behind the CT/Huawei team in network construction and trials in Guangzhou, and its cable experience is not as rich as in telecom, it can compensate with more expertise in IPTV network itself and home turf advantage of its powerful media and cable partners. Done right, and UTSI will likely be able to count on more future collaborative projects with Southern Media and other cable companies around the country, which is pretty exciting long-term opportunity. However, to win the bidding war for such a choice set of partners in such a major city, UTSI probably had to fight fiercely against local rival ZTE. So it might not make any money to win this deal. Probably even lose money, knowing how competitive ZTE can be in lowballing its rivals. So this win has not been rewarded by a higher stock price for financial reasons. UTSI needs to cut expense elsewhere in order to keep up the battle in IPTV.
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_U/threadview?m=tm&bn=27187&tid=157323&mid=157361&tof=15&rt=1&frt=1&off=1
Recognition for UT China IPTV Leadership - UTStarcom, Inc. (Nasdaq: UTSI - News) was presented with two awards at the 2008 EXPOCOMM China, October 21-25, 2008, for its long-standing Internet Protocol Television (IPTV) market leadership in China and direct contributions to the country's IPTV commercialization progress. China Electronics News named UTStarcom the "Best Commercial IPTV Vendor" in the country, and China Telecommunication Network gave the company its top "IPTV Industry Contribution Award."
http://biz.yahoo.com/prnews/090202/aqm045.html?.v=72
Over the last couple of years, UT has received numerious recognition in China/India which has worked out well for the customers but has not benefited shareholders.
UT executive pay - "Hong Liang Lu, Chairman, $700,000 per year; Peter Blackmore, President and Chief Executive Officer, $800,000 per year; Mark Green, Senior Vice President, Worldwide Human Resources and Real Estate, $367,500 per year; Susan Marsch, Senior Vice President, General Counsel, Secretary and Chief Ethics Officer, $330,000 per year and Viraj Patel, Interim Chief Financial Officer, Vice President, Corporate Controller, and Chief Accounting Officer, $288,750 per year. Susan Marsch was designated an Executive Officer by the Company on February 18, 2009."
There were also the usual stock grants based on "performance" metrics. hmmmmmmmm. Hong's salary should be reduced in the Chairman role. Overall, I think the salary is not excessive but most shareholders would like some commitment to company profitability and the share price.
Q4 2008 Results? - This was posted last week: Here's what Barry Hutton, UTSTARCOM Senior Director for Investor Relations, wrote in response to a similar question: "Our year end call is very likely to occur during the week of Feb. 23rd. That timing is consistent with both the year end reporting and the quarterly reporting during 2008. As always, 1 – 2 weeks in advance of the call we will issue a press release that provides the exact details for the conference call."
Shareprice and shareholder value - Back to the shareprice. According to book value and other metrics, UT is undervalued. The problem is it has been that way for the last few years. The current environment has not helped either. Some shareholders are calling for a sale but at this point, why? The stock was near $6 about 8 months ago and while there has been "permanent" value destruction/businesses in other companies such as the financials (Citigroup at $1.6 !), UT "should" be able to rebound stock wise IF they finally get closer to profitability.
Small caps in the tech sector have shown they can rebound much quicker as long as they have the technology, markets, and management. Palm went from $1 to $9. Starent is still a $1B company. Thats right $1 billion for a company UTStarcom is suing for basically stealing the technology for their main line of products. UT market cap of $150m is a joke. Are institutional holders selling in the $1-2 range. Yes. Look at the holdings of Brandes, State Street, Barclays, etc. Some of these institutions lost hundreds of millions and sometimes Billions in other companies they hold shares in. Their loss in other holdings can buy the entire UT 10x over! So, if they decide the company has turned a corner, the rebound can just be as swift. In the meantime, we small shareholders watch as the share price head to the low $1s and potentially under.
Advice to management during the next CC - While I hope for good 2009 guidance and signs for the timing when the company will break even and be profitable, I hope they take the opporutinity to let all the bad news out. Then address once and for all, what they will do to get back in the black. With the shareprice at this level, they might as well drop whatever bomb they are going to. The street is expecting the worse and if the stock should go lower, so what. For long-time shareholders, looking at a 95% or 96.5% loss is not much different and maybe, we can find the illusive inflection point and start moving up for good.
Have a good weekend.
Here are the related news over the last few weeks. Thanks to Tigre, Shadow, Techbroker and others that have continued to post.
PAS end of the road? - "According to Sina, the government in recent days have also ordered operators of services using the 1900-1920 MHz frequency band (that's PAS) to stop network expansion and adding new subscribers."
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_U/threadview?m=tm&bn=27187&tid=157210&mid=157210&tof=49&frt=1
Gepon in China - "Chinese telecom equipment manufacturers Huawei and ZTE (763.HK, 000063.SZ) have won first-round equipment bidding for China Telecom's (NYSE:CHA, 728.HK) gigabit passive optical network (GPON) 2300, reports Communications Weekly. Fiberhome Telecommunication Technologies (600498.SH) and Alcatel Shanghai Bell also shared the bidding. The manufacturers will provide the equipment to China Telecom for free, said an unnamed source. China Telecom plans to trial GPON 2300 in Beijing, Shanghai, Wuhan and Hangzhou." http://www.jlmpacificepoch.com/newsstories?id=141056_0_5_0_M
Good discussion on the boards regarding this news. http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_U/threadview?m=tm&bn=27187&tid=157323&mid=157323&tof=15&rt=1&frt=1&off=1
This is a relatively small trial (hence the free equipment) but nevertheless would like to see UT involved in trials/deployments. UT has previously mentioned winning small contracts in Gepon in China but at this stage it is still small.
Broadband/IPTV in Russia - Fixed-line growth, driven by demand for broadband and IPTV services, will help fuel Russia's telecom services market expansion from $37.2 billion in 2008 to $48.5 billion in 2013, according to a new Pyramid Research report, "Communications Markets in Russia." http://www.lightreading.com/document.asp?doc_id=172392
Still waiting for UT developments in Russia.
UT iptv win - (translated) The tender was finalized before the Spring Festival, UT Starcom to become the project's platform and terminal equipment provider, and the South together with the media for the city of Canton 800,000 cable provides the platform and equipment. 其互动电视业务将与广东的省网现有单向数字电视业务紧密关联。 Its interactive television business will be with the Guangdong provincial network of existing one-way digital TV business closely related. 互动电视业务建立在单向数字电视业务基础上，依托同一HFC网络进行传输。 Interactive TV business set up in a one-way digital television business, based on relying on the same HFC networks. 而双向机顶盒需同时承载互动电视业务和单向数字电视业务。 And two-way set-top box is required to carry a one-way interactive television services and digital television business.
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_U/threadview?m=tm&bn=27187&tid=157323&mid=157326&tof=15&rt=1&frt=1&off=1
Tigre's commentary: As Techbroker commented, this is a good strategic win for UTSI but probably not financially very rewarding. It's great that UTSI carve out a share of a tier-one city that was thought to be Huawei's, and likely defeated ZTE in the bidding. It's just as significant to gain an important partner in Southern Media, to expand beyond existing partnership with SMG. And it wins a chance to showcase the relevance of its IPTV technology as applied to cable, going beyond its traditional application in telecom. Even though it is 2-3 years behind the CT/Huawei team in network construction and trials in Guangzhou, and its cable experience is not as rich as in telecom, it can compensate with more expertise in IPTV network itself and home turf advantage of its powerful media and cable partners. Done right, and UTSI will likely be able to count on more future collaborative projects with Southern Media and other cable companies around the country, which is pretty exciting long-term opportunity. However, to win the bidding war for such a choice set of partners in such a major city, UTSI probably had to fight fiercely against local rival ZTE. So it might not make any money to win this deal. Probably even lose money, knowing how competitive ZTE can be in lowballing its rivals. So this win has not been rewarded by a higher stock price for financial reasons. UTSI needs to cut expense elsewhere in order to keep up the battle in IPTV.
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_U/threadview?m=tm&bn=27187&tid=157323&mid=157361&tof=15&rt=1&frt=1&off=1
Recognition for UT China IPTV Leadership - UTStarcom, Inc. (Nasdaq: UTSI - News) was presented with two awards at the 2008 EXPOCOMM China, October 21-25, 2008, for its long-standing Internet Protocol Television (IPTV) market leadership in China and direct contributions to the country's IPTV commercialization progress. China Electronics News named UTStarcom the "Best Commercial IPTV Vendor" in the country, and China Telecommunication Network gave the company its top "IPTV Industry Contribution Award."
http://biz.yahoo.com/prnews/090202/aqm045.html?.v=72
Over the last couple of years, UT has received numerious recognition in China/India which has worked out well for the customers but has not benefited shareholders.
UT executive pay - "Hong Liang Lu, Chairman, $700,000 per year; Peter Blackmore, President and Chief Executive Officer, $800,000 per year; Mark Green, Senior Vice President, Worldwide Human Resources and Real Estate, $367,500 per year; Susan Marsch, Senior Vice President, General Counsel, Secretary and Chief Ethics Officer, $330,000 per year and Viraj Patel, Interim Chief Financial Officer, Vice President, Corporate Controller, and Chief Accounting Officer, $288,750 per year. Susan Marsch was designated an Executive Officer by the Company on February 18, 2009."
There were also the usual stock grants based on "performance" metrics. hmmmmmmmm. Hong's salary should be reduced in the Chairman role. Overall, I think the salary is not excessive but most shareholders would like some commitment to company profitability and the share price.
Q4 2008 Results? - This was posted last week: Here's what Barry Hutton, UTSTARCOM Senior Director for Investor Relations, wrote in response to a similar question: "Our year end call is very likely to occur during the week of Feb. 23rd. That timing is consistent with both the year end reporting and the quarterly reporting during 2008. As always, 1 – 2 weeks in advance of the call we will issue a press release that provides the exact details for the conference call."
Shareprice and shareholder value - Back to the shareprice. According to book value and other metrics, UT is undervalued. The problem is it has been that way for the last few years. The current environment has not helped either. Some shareholders are calling for a sale but at this point, why? The stock was near $6 about 8 months ago and while there has been "permanent" value destruction/businesses in other companies such as the financials (Citigroup at $1.6 !), UT "should" be able to rebound stock wise IF they finally get closer to profitability.
Small caps in the tech sector have shown they can rebound much quicker as long as they have the technology, markets, and management. Palm went from $1 to $9. Starent is still a $1B company. Thats right $1 billion for a company UTStarcom is suing for basically stealing the technology for their main line of products. UT market cap of $150m is a joke. Are institutional holders selling in the $1-2 range. Yes. Look at the holdings of Brandes, State Street, Barclays, etc. Some of these institutions lost hundreds of millions and sometimes Billions in other companies they hold shares in. Their loss in other holdings can buy the entire UT 10x over! So, if they decide the company has turned a corner, the rebound can just be as swift. In the meantime, we small shareholders watch as the share price head to the low $1s and potentially under.
Advice to management during the next CC - While I hope for good 2009 guidance and signs for the timing when the company will break even and be profitable, I hope they take the opporutinity to let all the bad news out. Then address once and for all, what they will do to get back in the black. With the shareprice at this level, they might as well drop whatever bomb they are going to. The street is expecting the worse and if the stock should go lower, so what. For long-time shareholders, looking at a 95% or 96.5% loss is not much different and maybe, we can find the illusive inflection point and start moving up for good.
Have a good weekend.
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