For the techy's out there, the specs for UTs PTN product is available on their website.
http://www.utstar.com/Products/Optical_Transport_Networks/MPLS-TP/
A recent article on China mobile and plans for PTN in China.
http://www.cn-c114.net/583/a452063.html
From Lightreading,
Trebnick thinks Juniper needs to get a mobile packet core product, specifically. If it's developing one on its own, that's going to take $250 million to $300 million in R&D costs, she writes.
The other option would be an acquisition. Cisco and Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) have put claims on Starent Networks Corp. (Nasdaq: STAR) and WiChorus, respectively, in the past two weeks. Assuming Juniper doesn't want to start a bidding war for those two, it could try acquiring Stoke Inc. or the mobile core assets of Harris Stratex Networks Inc. (Nasdaq: HSTX), Trebnick writes. (See Cisco to Buy Starent for $2.9B and Cisco/Starent Deal Hurts Juniper.)
http://www.lightreading.com/document.asp?doc_id=183728&
While the market has surged this year, it has been another frustrating year for UT shareholders. I do choose to look forward and stick with the company. With their balance sheet, controlled expenses, product line, target markets and renewed focus in China, thats a recipe for success. Have I mentioned how incredibly cheap this company is? :-)
Wednesday, October 28, 2009
Saturday, October 3, 2009
Conference Call with Peter Blackmore
Earlier in the week, I had a conference call with Peter Blackmore, UTStarcom CEO and Barry Hutton, Senior IR for the company. Peter had just come back from a three week trip from China (and also recently in Japan). I had some concerns with the management situation of the company (among other things) and Peter allocated some time for a call this week before going back to China again. Here are the items that were discussed.
Management Team - With Hong Lu stepping down from his executive position, the departures of Robert Wu (China CEO) and Craig Samuel (UTStarcom CTO), the vacant COO and Viraj Patel’s Interim position, the management ranks seemed disorganized, light and was not positioned for the long term. Peter responded by highlighting Luis Dominguez (SVP) of International Sales, Marketing, and Services and the heads in India and Japan. He specially alluded to the company’s “move” to China and the executives based there, namely Charles Mah (SVP, China Sales, Marketing, and Services) and the business unit heads (Yanya Sheng/BBU, Dr. Baijun Zhao/MCBU, and K.P. Lim/VP Chief Quality Officer). Peter seemed very happy with the current transition/restructuring in China and discussed potentially rounding up the team with a COO.
I specifically wanted to discuss his hire of Craig Samuel. Peter mentioned that Craig Samuel was the #2 CTO guy at HP and would have liked to have kept him but due to the restructuring, parted ways.
I asked Peter if he was personally involved in any of the hiring in China and he mentioned not at the BU (business unit) level but just under. The BU heads have been with the company a while. Peter also mentioned hiring new sales people, some from Huawei and commented that he liked them because of their aggressiveness.
Bookings – I asked Peter why he did not discuss bookings (book to bill) in detail the last quarter like they do in previous years. Peter mentioned that book to bill was “positive” (I take that to mean >1) but they do not give breakdowns of the bookings. Barry commented that it is not simple to come up with a definitive number due to the way various contracts are set up. Peter added that international was “positive”. I definitely wanted to get a number and breakdown by BUs but the best I could do was a reassurance that they are not trying to hide anything and that business was tracking well. I asked about new contracts. It seems that some of the contracts we hear are very similar to previous ones and Peter said they definitely take a good amount of time to select which ones to discuss on the CC and that they are all new wins. This led to the next topic.
PRs – Why don’t we see more of these? Once every six months is hardly representative of the business. Barry mentioned they are working to improve on this end but even putting out PRs takes a tremendous amount of time (talking to various people/legal/sales/contracts in preparing the PRs) specially during the move back to China where resources are more constrained now. Again, I mentioned there has to be a middle ground where investors can get a more representative view of the business end. Peter mentioned an upcoming PR on an enterprise TN win coming up (more on TN later).
Taiwan IPTV – I wanted to get more information on the progress with Markwell since the original PR was in late 2007 and it only went “live” in May (which they announced in one of the CC this year). Peter mentioned that Taiwan iptv is not going to be anywhere as large as India/China. They do also have some broadband contracts with CHT in Taiwan that’s doing well, selling their MSTP product. (Got into a quick back/forth and said whats well? $2-3m? Peter mentioned more than that…). I also talked about DESCA and tried to get a ballpark revenue target but didn’t get a figure. Peter did mention DESCA’s main supplier was Cisco and I guess it was a good arrangement that they are also now a supplier.
Mobile IPTV- I asked about the competition with CMMB, the China mobile iptv standard that others are using for video. How competitive will UTs mobile iptv be against that when 30 other suppliers may go with the CMMB. Peter mentioned that they are also talking to other handset suppliers to license/use their mobile iptv software/system. How much is their handsets for mobile iptv. Peter mentioned it doesn’t take a major smart phone like the I-phone so the cost right now per handset is $150-200 (mid-tier pricing).
India BSNL Phase III – On track for Q4 – I didn’t bring this up but Peter talked about this as part of another discussion.
GPON – I mentioned to Peter about hearing they had presented GPON as part of their product lineup in a recent conference/marketing event. Peter mentioned that this must have been the China Telecom event where they were a major sponsor and he got to talk with many government officials. He said they are modifying their GEPON product to develop GPON as well but that the GPON product is not ready as of yet.
Transport Network (TN) Product –As part of the product discussions, we got to TN and Peter brought up Bill Huang, UT’s former CTO now with China Mobile. Peter mentioned that Bill Huang was quite impressed (not sure if that was the exact word) with UTs current product lineup/R&D and will be in discussions for the TN product in Q4. I asked do they have ANY contracts with China mobile now. Peter said no and that is due to their backing off the broadband market previously. Regarding TN, Peter mentioned that as usual, this market will be shared with ZTE, Huawei, and possibly another vendor. Peter mentioned that Softbank also had positive words for their TN product and its performing well. He added that China Telecom, which is their main customer for years is late in the TN area and is just in the pilot testing stage.
US Partner – I wanted to check with Peter if DESCA is the partner that he talked about in previous cc. He said no and that the technology partner he was talking about wants to sell UT products in the US. Peter mentioned the TN product in particular.
Being more “Chinese” – Towards the end, I discussed with Peter the situation with him being non-Chinese and the Western BOD meant that they are still perceived as handicapped and what they are doing. Peter mentioned (again) about looking into Chinese board members and looking potentially for a Chinese COO. Are there investors, partners, etc? No other comment on that front (not that I expected an answer but I’m sure other investors have discussed this with Peter). Peter mentioned he is working 15-16 hr days and has an apartment in China.
One of my last comments to Peter (and there were probably a lot of “last” comments) was that bottom line, the company’s business is being valued at zero (or less) so there is a lot of disappointed shareholders. Peter mentioned there is a lot of work still ahead. I thanked him for his time.
As I write this post, I think of other items such as IPTV discussions, the sale of the building, OPEX, PDSN, cash positions and other usual points of discussion but there is always just a limited amount of time and some topics just flow in certain directions.
Have a good weekend.
Management Team - With Hong Lu stepping down from his executive position, the departures of Robert Wu (China CEO) and Craig Samuel (UTStarcom CTO), the vacant COO and Viraj Patel’s Interim position, the management ranks seemed disorganized, light and was not positioned for the long term. Peter responded by highlighting Luis Dominguez (SVP) of International Sales, Marketing, and Services and the heads in India and Japan. He specially alluded to the company’s “move” to China and the executives based there, namely Charles Mah (SVP, China Sales, Marketing, and Services) and the business unit heads (Yanya Sheng/BBU, Dr. Baijun Zhao/MCBU, and K.P. Lim/VP Chief Quality Officer). Peter seemed very happy with the current transition/restructuring in China and discussed potentially rounding up the team with a COO.
I specifically wanted to discuss his hire of Craig Samuel. Peter mentioned that Craig Samuel was the #2 CTO guy at HP and would have liked to have kept him but due to the restructuring, parted ways.
I asked Peter if he was personally involved in any of the hiring in China and he mentioned not at the BU (business unit) level but just under. The BU heads have been with the company a while. Peter also mentioned hiring new sales people, some from Huawei and commented that he liked them because of their aggressiveness.
Bookings – I asked Peter why he did not discuss bookings (book to bill) in detail the last quarter like they do in previous years. Peter mentioned that book to bill was “positive” (I take that to mean >1) but they do not give breakdowns of the bookings. Barry commented that it is not simple to come up with a definitive number due to the way various contracts are set up. Peter added that international was “positive”. I definitely wanted to get a number and breakdown by BUs but the best I could do was a reassurance that they are not trying to hide anything and that business was tracking well. I asked about new contracts. It seems that some of the contracts we hear are very similar to previous ones and Peter said they definitely take a good amount of time to select which ones to discuss on the CC and that they are all new wins. This led to the next topic.
PRs – Why don’t we see more of these? Once every six months is hardly representative of the business. Barry mentioned they are working to improve on this end but even putting out PRs takes a tremendous amount of time (talking to various people/legal/sales/contracts in preparing the PRs) specially during the move back to China where resources are more constrained now. Again, I mentioned there has to be a middle ground where investors can get a more representative view of the business end. Peter mentioned an upcoming PR on an enterprise TN win coming up (more on TN later).
Taiwan IPTV – I wanted to get more information on the progress with Markwell since the original PR was in late 2007 and it only went “live” in May (which they announced in one of the CC this year). Peter mentioned that Taiwan iptv is not going to be anywhere as large as India/China. They do also have some broadband contracts with CHT in Taiwan that’s doing well, selling their MSTP product. (Got into a quick back/forth and said whats well? $2-3m? Peter mentioned more than that…). I also talked about DESCA and tried to get a ballpark revenue target but didn’t get a figure. Peter did mention DESCA’s main supplier was Cisco and I guess it was a good arrangement that they are also now a supplier.
Mobile IPTV- I asked about the competition with CMMB, the China mobile iptv standard that others are using for video. How competitive will UTs mobile iptv be against that when 30 other suppliers may go with the CMMB. Peter mentioned that they are also talking to other handset suppliers to license/use their mobile iptv software/system. How much is their handsets for mobile iptv. Peter mentioned it doesn’t take a major smart phone like the I-phone so the cost right now per handset is $150-200 (mid-tier pricing).
India BSNL Phase III – On track for Q4 – I didn’t bring this up but Peter talked about this as part of another discussion.
GPON – I mentioned to Peter about hearing they had presented GPON as part of their product lineup in a recent conference/marketing event. Peter mentioned that this must have been the China Telecom event where they were a major sponsor and he got to talk with many government officials. He said they are modifying their GEPON product to develop GPON as well but that the GPON product is not ready as of yet.
Transport Network (TN) Product –As part of the product discussions, we got to TN and Peter brought up Bill Huang, UT’s former CTO now with China Mobile. Peter mentioned that Bill Huang was quite impressed (not sure if that was the exact word) with UTs current product lineup/R&D and will be in discussions for the TN product in Q4. I asked do they have ANY contracts with China mobile now. Peter said no and that is due to their backing off the broadband market previously. Regarding TN, Peter mentioned that as usual, this market will be shared with ZTE, Huawei, and possibly another vendor. Peter mentioned that Softbank also had positive words for their TN product and its performing well. He added that China Telecom, which is their main customer for years is late in the TN area and is just in the pilot testing stage.
US Partner – I wanted to check with Peter if DESCA is the partner that he talked about in previous cc. He said no and that the technology partner he was talking about wants to sell UT products in the US. Peter mentioned the TN product in particular.
Being more “Chinese” – Towards the end, I discussed with Peter the situation with him being non-Chinese and the Western BOD meant that they are still perceived as handicapped and what they are doing. Peter mentioned (again) about looking into Chinese board members and looking potentially for a Chinese COO. Are there investors, partners, etc? No other comment on that front (not that I expected an answer but I’m sure other investors have discussed this with Peter). Peter mentioned he is working 15-16 hr days and has an apartment in China.
One of my last comments to Peter (and there were probably a lot of “last” comments) was that bottom line, the company’s business is being valued at zero (or less) so there is a lot of disappointed shareholders. Peter mentioned there is a lot of work still ahead. I thanked him for his time.
As I write this post, I think of other items such as IPTV discussions, the sale of the building, OPEX, PDSN, cash positions and other usual points of discussion but there is always just a limited amount of time and some topics just flow in certain directions.
Have a good weekend.
Monday, September 14, 2009
Bull Flag
While the message boards is full of the usual negativity (understandable by the way), UTs stock chart has formed a "bull flag".
Vital Signs
Bull flag formations involve two distinct parts, a near vertical, high volume flag pole and a parallel, low volume consolidation comprised of four points and an upside breakout.
The actual flag formation of a bull flag pattern must be less than 20 trading sessions in duration.
Most flag patterns occur at the middle of the larger move higher for a stock.
Upside breakouts often lead to small 2-3% rallies followed by an immediate test of the breakout level.
If the stock closes below this level (now support) for any reason the pattern becomes invalid
=============================================================
The pole measured a hefty 84 cents ($2.36-$1.52), give or take a few cents. This consolidation (symmetrical triangle or pennant) breakout is at $2.05-2.1 range. That would put UT close to $3 within a month IF this played out.
As with TA, "timing" may be a little off (head fakes) and you should look for volume confirmation.
Have a good evening.
Thursday, September 10, 2009
DESCA, IPTV, Trading Range, Profitability, and Partner
Reseller Agreement with DESCA -
ALAMEDA, Calif., Sept. 9 /PRNewswire-FirstCall/ -- UTStarcom, Inc. (Nasdaq: UTSI - News) today announced a Reseller Agreement with DESCA, a Miami-based infrastructure and telecommunications networking company and wholly-owned subsidiary of eLandia (OTC Bulletin Board: ELAN - News). The Agreement will help accelerate UTStarcom's expansion into 14 markets in Central and South America with the support from DESCA's team of more than 700 sales, service delivery professionals and customer service agents.
http://finance.yahoo.com/news/UTStarcom-Announces-Reseller-prnews-2299357254.html?x=0&.v=1
These are a couple of comments from the message boards,
"TTM of revenue for the holdin g company is $211MM. The 3rd and 4th Q are their strongest quarters so don't go by the first 6 months. Also, DESCA is just 1 of 3 or 4 operations of theirs so the total reveue is higher for the entire holding company (ELAN)They have $30mm in cash with no real long-term debt other than a $17MM capital infrastructure project that makes them $$. The receivables are $50MM and CSCO capital is the reason why they have short term debt. CSCO demands payment very quickly. So they have short term debt like any other company would to pay the vendor. The receivables take care of that. Why don't you call the company and ask then about the DESCA deal? It looks like DESCA has a lot of stock coming to them based on performance and that's why they sold the 30% for little cash. They want the stock at low prices where there is far more upside. They stand to make a lot of money by taking future stock considerations. "
"ELAN is the holding company. revenue for TTM is $211MM. DESCA accounts for 80% of the revenue. DESCA's revenue is at least $170MM. It could be more. I had heard that the company was planning on $300MM in revenue in the coming year 2010 and 2011. Also, remember, most companies in the world saw declines in revenue throughout the recession so that is not something to look at. The CEO over there came from Telefonica USA which is a subsidiary of the largest telecom company in the world- telefonica Espana. he went there b/c they have an amazing growth platform ahead of them. UTSI WILL do well with this partnership. Actually, both companies stand to do very well with this partnership. Hope this helps you. DESCA also has very high achievements and is a top CSCO vendor in may categories."
I'd like to add that this agreement does a few things:
1. The company gets to work with a local partner to market their products in 14 countries.
2. They get added revenue while introducing products into small to mid-size projects. Those DESCA clients exposed to UT products (may be better or cheaper) will start building confidence in UT products.
3. They can cut costs/scale back employees in these areas while still maintaining a foothold.
4. They continue to sell their IP besed products (rather than handsets for ex.) and generate revenue from their core products. UT has spent significant money on R&D for their core products over the years so they just need new markets without having to spend a lot for marketing/trials.
5. The company can get a set margin for their products (with agreed pricing) as DESCA orders them and get paid earlier.
IPTV market share - From the same DESCA PR, "UTStarcom is the IPTV market share leader in both China and India. UTStarcom is also the market share leader in India's broadband market."
Blackmore has mentioned that there was a slowdown in IPTV in China due to the carriers focus on 3G this year. While UT will lose some contracts as per the last blog posting shows, UT should still be well positioned (if not better now) for the boom projected for the next few years.
New stock trading range - The stock had traded in the $1.4-1.8 range for the last few months and finally broke out last week. Its interesting to note the $1.88 "high" on the last trading range and the same price it hit this week after coming down from $2.36 last week. While not important for long time holders, traders need to pay attention to these things so they are buying and not selling at the lower end.
Profitability - The sale of non-core assets, the move back to China, the massive cost cuts, outsourcing manufacturing, partnering all point to a focused and aggressive plan by Blackmore and the company to get to profitability despite the world recession, slow ramp of core products, and collapse of PAS and Japanese revenues. While shareholders have still suffered a lot, I like the moves and believe Blackmore can unlock significant shareholder value as they drive towards profitability.
Partner - Blackmore mentioned the US partner in one of the previous conference call and discussed the partner (with investors) as filling in product lines that UT did not have and vice versa (for example GPON). While the DESCA partnership is good, this did not look like the "partner" that Peter was talking about. I asked one institutional investor to check and confirm if there was another partner Peter was talking about and got confirmation that this was not the partner that Peter was talking about. They are also working with multiple potential partners.
Closing comments - I'd like to reiterate that a sale is probably not in the works for various reasons but this is actually a very good thing as the stock is (I believe) tremendously undervalued. My discussions with management with the stock in the $3-$5+ range and more suggest they believe the best way to get to higher share prices is to get to profitability. Of course, shareholders could not have agreed more but it looks like this new path (see above) to profitability has more chances of success (rather than just hoping hundreds of millions in revenue would come in).
ALAMEDA, Calif., Sept. 9 /PRNewswire-FirstCall/ -- UTStarcom, Inc. (Nasdaq: UTSI - News) today announced a Reseller Agreement with DESCA, a Miami-based infrastructure and telecommunications networking company and wholly-owned subsidiary of eLandia (OTC Bulletin Board: ELAN - News). The Agreement will help accelerate UTStarcom's expansion into 14 markets in Central and South America with the support from DESCA's team of more than 700 sales, service delivery professionals and customer service agents.
http://finance.yahoo.com/news/UTStarcom-Announces-Reseller-prnews-2299357254.html?x=0&.v=1
These are a couple of comments from the message boards,
"TTM of revenue for the holdin g company is $211MM. The 3rd and 4th Q are their strongest quarters so don't go by the first 6 months. Also, DESCA is just 1 of 3 or 4 operations of theirs so the total reveue is higher for the entire holding company (ELAN)They have $30mm in cash with no real long-term debt other than a $17MM capital infrastructure project that makes them $$. The receivables are $50MM and CSCO capital is the reason why they have short term debt. CSCO demands payment very quickly. So they have short term debt like any other company would to pay the vendor. The receivables take care of that. Why don't you call the company and ask then about the DESCA deal? It looks like DESCA has a lot of stock coming to them based on performance and that's why they sold the 30% for little cash. They want the stock at low prices where there is far more upside. They stand to make a lot of money by taking future stock considerations. "
"ELAN is the holding company. revenue for TTM is $211MM. DESCA accounts for 80% of the revenue. DESCA's revenue is at least $170MM. It could be more. I had heard that the company was planning on $300MM in revenue in the coming year 2010 and 2011. Also, remember, most companies in the world saw declines in revenue throughout the recession so that is not something to look at. The CEO over there came from Telefonica USA which is a subsidiary of the largest telecom company in the world- telefonica Espana. he went there b/c they have an amazing growth platform ahead of them. UTSI WILL do well with this partnership. Actually, both companies stand to do very well with this partnership. Hope this helps you. DESCA also has very high achievements and is a top CSCO vendor in may categories."
I'd like to add that this agreement does a few things:
1. The company gets to work with a local partner to market their products in 14 countries.
2. They get added revenue while introducing products into small to mid-size projects. Those DESCA clients exposed to UT products (may be better or cheaper) will start building confidence in UT products.
3. They can cut costs/scale back employees in these areas while still maintaining a foothold.
4. They continue to sell their IP besed products (rather than handsets for ex.) and generate revenue from their core products. UT has spent significant money on R&D for their core products over the years so they just need new markets without having to spend a lot for marketing/trials.
5. The company can get a set margin for their products (with agreed pricing) as DESCA orders them and get paid earlier.
IPTV market share - From the same DESCA PR, "UTStarcom is the IPTV market share leader in both China and India. UTStarcom is also the market share leader in India's broadband market."
Blackmore has mentioned that there was a slowdown in IPTV in China due to the carriers focus on 3G this year. While UT will lose some contracts as per the last blog posting shows, UT should still be well positioned (if not better now) for the boom projected for the next few years.
New stock trading range - The stock had traded in the $1.4-1.8 range for the last few months and finally broke out last week. Its interesting to note the $1.88 "high" on the last trading range and the same price it hit this week after coming down from $2.36 last week. While not important for long time holders, traders need to pay attention to these things so they are buying and not selling at the lower end.
Profitability - The sale of non-core assets, the move back to China, the massive cost cuts, outsourcing manufacturing, partnering all point to a focused and aggressive plan by Blackmore and the company to get to profitability despite the world recession, slow ramp of core products, and collapse of PAS and Japanese revenues. While shareholders have still suffered a lot, I like the moves and believe Blackmore can unlock significant shareholder value as they drive towards profitability.
Partner - Blackmore mentioned the US partner in one of the previous conference call and discussed the partner (with investors) as filling in product lines that UT did not have and vice versa (for example GPON). While the DESCA partnership is good, this did not look like the "partner" that Peter was talking about. I asked one institutional investor to check and confirm if there was another partner Peter was talking about and got confirmation that this was not the partner that Peter was talking about. They are also working with multiple potential partners.
Closing comments - I'd like to reiterate that a sale is probably not in the works for various reasons but this is actually a very good thing as the stock is (I believe) tremendously undervalued. My discussions with management with the stock in the $3-$5+ range and more suggest they believe the best way to get to higher share prices is to get to profitability. Of course, shareholders could not have agreed more but it looks like this new path (see above) to profitability has more chances of success (rather than just hoping hundreds of millions in revenue would come in).
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."
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_U/threadview?m=tm&bn=27187&tid=160943&mid=160943&tof=1&frt=1
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.
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_U/threadview?m=tm&bn=27187&tid=160943&mid=160943&tof=1&frt=1
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.
Wednesday, August 12, 2009
Gemdale
In the June restructuring call, Peter mentioned hiring a real estate company to sell their Hangzhou property. It is interesting but probably not surprising that this company is Gemdale. Here is a chart of Gemdale the past 3 years (split adjusted).
http://www.reuters.com/finance/stocks/chart?symbol=600383.SS
UT sold their Gemdale shares between 15-20Y back in late 2007 netting about $90m. The stock actually got to a low of 3+Y and now trades at about 17Y.
The property is on the books for around $160m and another shareholder (Techbroker) talked about the rising property values in China and an estimated $300m for the land alone.
The company is projected to end the year with net cash of over $200m and to break even next year. Working capital needs (credit lines) are much lower than before but so is their available credit. The building could be use for collateral (and it will be if certain threshold amounts are used up per the last quarterly filing) so I'm not sure what they would need a major cash influx for. Peter did mention the upcoming Phase III BSNL contract so that they may use the funds for that contract. Anyway, that sale will take some time as Peter mentioned but its interesting that he mentioned it again this last call.
http://www.reuters.com/finance/stocks/chart?symbol=600383.SS
UT sold their Gemdale shares between 15-20Y back in late 2007 netting about $90m. The stock actually got to a low of 3+Y and now trades at about 17Y.
The property is on the books for around $160m and another shareholder (Techbroker) talked about the rising property values in China and an estimated $300m for the land alone.
The company is projected to end the year with net cash of over $200m and to break even next year. Working capital needs (credit lines) are much lower than before but so is their available credit. The building could be use for collateral (and it will be if certain threshold amounts are used up per the last quarterly filing) so I'm not sure what they would need a major cash influx for. Peter did mention the upcoming Phase III BSNL contract so that they may use the funds for that contract. Anyway, that sale will take some time as Peter mentioned but its interesting that he mentioned it again this last call.
Saturday, August 8, 2009
Technicals
Here is a 6 month chart with the 20 and 50 day overlay.
http://finance.yahoo.com/q/ta?s=UTSI&t=6m&l=on&z=l&q=b&p=m50,m20&a=&c=
The initial cross back at 90 cents was a prelude to a nice run to $2.43, close to the November 2008 highs.
Now, the stock sits right at the 50 day with the 20 day trending up and coming up fast. I had commented in the past about the 20 day moving average. The stock was comfortably above the 20 day on its run up but broke down around the $2 area, subsequently reaching $1.35, which interestingly enough was the launch from the low $1 range. For trading, the 20 day is a farily good indicator and you should be long as it is above that. The bears had a nice attack early Friday but failed to bring it down. A few weeks ago, the 50 day was around $1.8 and $1.83/1.84 was the high just after the shareholder meeting. Now, that it has gone down slightly, the breakout point is here. Next week could be the long overdue breakout as the stock is incredibly cheap.
Just some gibberish technicals for traders out there. I'd like to see more volume for more confirmation from a technical standpoint. I'll post more on the earnings call later this weekend.
http://finance.yahoo.com/q/ta?s=UTSI&t=6m&l=on&z=l&q=b&p=m50,m20&a=&c=
The initial cross back at 90 cents was a prelude to a nice run to $2.43, close to the November 2008 highs.
Now, the stock sits right at the 50 day with the 20 day trending up and coming up fast. I had commented in the past about the 20 day moving average. The stock was comfortably above the 20 day on its run up but broke down around the $2 area, subsequently reaching $1.35, which interestingly enough was the launch from the low $1 range. For trading, the 20 day is a farily good indicator and you should be long as it is above that. The bears had a nice attack early Friday but failed to bring it down. A few weeks ago, the 50 day was around $1.8 and $1.83/1.84 was the high just after the shareholder meeting. Now, that it has gone down slightly, the breakout point is here. Next week could be the long overdue breakout as the stock is incredibly cheap.
Just some gibberish technicals for traders out there. I'd like to see more volume for more confirmation from a technical standpoint. I'll post more on the earnings call later this weekend.
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