Cable Tech

UTStarcom Unveils New Look

The new strategy at UTStarcom Inc. (Nasdaq: UTSI) uses the same old products, but executives say they're launching some structural changes that will help drive the company toward profitability.

The process, announced in a conference call with investors late yesterday, includes layoffs, although the number isn't being disclosed and hasn't been approved by the board.

UTStarcom announced last month that it had decided against selling itself, or parts of itself. New chief operating officer Peter Blackmore, who will eventually take over as CEO, promised that the company would form a new plan and communicate it to employees by the end of August, which the company did. (See UTStarcom Readies Plan B.)

All told, UTStarcom's goal is to cut $10 million to $15 million from quarterly operating expenses. The company actually would like to cut more than that, CFO Fran Barton said, but its plans so far will account for savings of only $10 million to $15 million.

The new strategy doesn't involve cutting any products. Instead, UTStarcom is picking favorites. IPTV and broadband transport -- the latter group including softswitches, access devices, and optical transport -- are being named the core technologies and the primary focus of UTStarcom's efforts.

The proprietary Personal Access Service, developed for the Chinese cellular market, falls in neither category. But given that it comprises possibly half of UTStarcom's revenues and has 56 million subscribers in China, PAS is still a priority, Blackmore said.

Everything else is going into four separate business units:
  • Personal Communications Division, which sells handsets other than PAS
  • Terminal Business Units, developing handsets and related devices for telematics
  • A "custom solutions" business unit for areas such as IP messaging and transaction gateways.

So, what's changed? Blackmore says these four business units are chartered with eventually becoming profitable, and they'll be given some autonomy in areas like R&D spending.

"We wanted to make the people who led those be very accountable, so we have very profitable businesses. At the moment, some of those are not profitable," Blackmore said on the call.

UTStarcom is not directly saying the non-core businesses are being groomed for selloffs. The idea is "something we are very much open to, and it depends on the price, if we like it or not," company CEO Hong Lu said when asked during the call. But he stressed that UTStarcom is primarily trying to make sure the business units can each "survive by themselves."

Prior to the call, UTStarcom had a good news/bad news day. It announced an IPTV deployment with Bharti Airtel Ltd. (Mumbai: BHARTIARTL) that's been public knowledge for weeks. Separately, UTStarcom wrapped up its investigation of its China sales divisions, finding that one region out of five had improperly recorded revenues. "The revenue is real; however, it needs to be recognized in the applicable period," CFO Fran Barton said in a statement. (See UTStarcom Rolls IPTV in India and UTStarcom Preps Restatements.)

That's going to result in another set of earnings restatements, on top of the stock options restatements announced in August.

On the plus side, UTStarcom says it's got no further restatements up its sleeve. The company could be on track to file its delayed quarterly reports -- going back to the third quarter of 2006 -- in October, officials said.

— Craig Matsumoto, West Coast Editor, Light Reading

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