UTStarcom Raises $475M, Guidance

Burgeoning equipment company UTStarcom Inc. (Nasdaq: UTSI) saw its shares fall nearly 7 percent today after it sold 12.1 million shares to Banc of America Securities LLC (see UTStarcom Sells 12.1M Shares).

The sale raised about $475 million in cash. Banc of America Securities also has an option to buy a further 1.8 million shares. UTStarcom had $453 million in cash at the end of its third quarter (September 30, 2003).

In a statement, UTStarcom said the cash had been raised for strategic and general purposes such as "acquisitions, investments, working capital or capital expenditures."

The vendor also released preliminary revenue figures for the fourth quarter of 2003 of $640 million to $645 million, up from its previous estimate of $630 million to $640 million. Full figures will be announced on January 22. UTStarcom also raised its revenue guidance for 2004, which now stands at $2.5 billion to $2.55 billion instead of $2.4 billion to $2.5 billion. Gross margins are expected to remain at 30 to 32 percent, while GAAP earnings per share for 2004 are now set to be between $1.87 and $1.92, down from the $1.92 to $1.95 range previously announced.

The company's share price dipped $2.72 (6.58%) to $38.62 in opening trading. UTStarcom's stock has a 12-month low of $16.57 (in March 2003) and a high of $46.45 (August 2003).

Analysts at Lehman Brothers believe investors would have been hoping for a greater upside to fourth-quarter revenues, given the company's recent spate of contract announcements in China and Japan and elsewhere in the Asia/Pacific region (see UTStarcom Wins Vietnam Contract and UTStarcom Wins Again in China).

On a positive note, however, the Lehman team predicts a further boost in 2004 to UTStarcom's personal access system (PAS) line of business, general growth in the broadband infrastructure sector, and ongoing market growth in two of the vendor's key markets, China and India. PAS uptake has been particularly strong during 2003 (see China's PAS Usage Hits 32M), while the vendor looks set to expand its DSL infrastructure business further in 2004 (see UTStarcom Deploys More DSLAMs and UTStarcom Ranked #2 in DSLAMs).

— Ray Le Maistre, International Editor, Boardwatch