ALAMEDA, Calif. -- UTStarcom, Inc. (Nasdaq: UTSI - News), a global leader in IP access networking and services, today reported its second quarter revenues and earnings for the three months ended June 30, 2004.

"UTStarcom continues to go through a significant transformation as a company," said Hong Lu, chief executive officer of UTStarcom. Just four years ago, UTStarcom was heavily focused on China and PAS technology. In the past year, we entered a number of new markets through a combination of organic growth and strategic acquisitions. I believe that the next six months will be a crucial transition period for UTStarcom as we integrate all new initiatives into our core business model and emerge as a truly diversified global telecom solutions provider.

"This second quarter is an example of both the successes and the challenges we experience as a company going through such a transformation," Lu continued. "We are disappointed with the weaker than anticipated gross margins and earnings per share, which are primarily the result of continued pricing pressure in China as well as supply chain constraints that delayed recognition of some higher-margin international revenues. At the same time, we are optimistic as we experience an increasingly strong global demand for our products and are committed to executing on our long-term strategy of delivering profitable growth to our shareholders. In the second quarter, we signed nearly $300 million in international contracts, bringing the total to more than $400 million in the first half of the year."

Net sales for the second quarter of 2004 were $689.6 million, an increase of 70 percent over net sales of $405.8 million reported in the second quarter of 2003.

Second quarter gross margins came in at 25.4 percent, as compared to projected gross margins of 27-28 percent.

GAAP net income for the second quarter of 2004 was $43.2 million, or $0.32 per share. This compares to net income of $39.4 million, or $0.33 per share, for the second quarter of 2003.

UTStarcom Inc.