Optical/IP Networks

UTStarcom Doubles Revenues in Q4

UTStarcom Inc. (Nasdaq: UTSI) continues on an access rampage, as the company doubled its net revenues during the fourth quarter of 2003 and raised its guidance for the first quarter of 2004.

For the fourth quarter, UTStarcom pulled down a profit of $66.4 million, or 52 cents a share, on revenues of $643.6 million. During its year-ago quarter, UTStarcom reported a profit of $33.9 million, or 30 cents a share, on revenues of $301.1 million.

The company's impressive financial results aren't surprising, considering China's steady supply of new wireless phone subscribers and broadband users. But how long will China continue to be fertile ground for new growth?

The question hangs in the air, as Lucent Technologies Inc. (NYSE: LU) cited China for two elements of its earnings picture -- wireless growth and wireline decline (see China, Wireless Save Lucent ). UTStarcom, though, seems to be enjoying progress on both fronts.

The number of subscribers on UTStarcom’s PAS networks in China reached 21 million at the end of the fourth quarter (see UTStarcom Signs $200M Chinese Deal). In addition, there are now about 3.8 million subscribers for Yahoo! BB's broadband Internet service, and about 3.3 million subscribers for its VOIP service. That growth spurred the provider to expand its IP-DSLAM contract with UTStarcom, which is the supplier for the network, by about $40 million during the quarter (see UTStarcom Deploys More DSLAMs).

UTStarcom's full-year sales also more than doubled. For the full year 2003, it earned $202.3 million, or $1.64 a share, on revenues of $1.96 billion. During 2002, the company earned $107.9 million, or 94 cents a share, on revenues of $981.8 million.

The company also says it generated $47.4 million in positive cash-flow from operations for the fourth quarter and $50 million positive cash-flow from operations for all of 2003.

Late last year, UTStarcom raised about $475 million in cash in a stock sale to Banc of America Securities LLC. Investors pummeled the company's shares at the time, but now everyone's waiting to see what UTStarcom is going to do with the war-chest it's amassed (see UTStarcom Raises $475M, Guidance ).

And there's an issue of backlog this quarter, too. UTStarcom says at the end of 2003 it had about $1.06 billion worth of sales orders waiting to be fulfilled. That's up from the $605.4 million backlog it reported at the end of 2002. The company's CFO, Mike Sophie, says its handset sales represent about 11 percent of the backlog.

So with all that backlog, UTStarcom was able to give much higher guidance than it's given in the past. UTStarcom says it expects revenues to be about $570 million to $580 million for the first quarter of 2004 with a 7 to 8 percent sequential increase in each quarter remaining this year.

The company says its GAAP earnings per share for the full year 2004 will be in the range of $1.90 to $1.94 a share, up from its previous guidance of $1.87 to $1.92 a share.

— Phil Harvey, Senior Editor, Light Reading

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