Choose your language

UTStarcom Annouces Preliminary Third Quarter 2005 Financial Results

ALAMEDA, Calif., Oct. 6 /PRNewswire-FirstCall/ -- UTStarcom, Inc. (Nasdaq:
UTSI), a global leader in IP-based, end-to-end networking solutions and
services, today announced that revenues and profits for the third quarter 2005
will be below management guidance provided on August 2, 2005. The Company
currently expects total revenues of approximately $620 million to $640 million
compared to its previous target range of $660 million to $680 million.

UTStarcom Annouces Preliminary Third Quarter 2005 Financial Results
UTStarcom Annouces Preliminary Third Quarter 2005 Financial Results

- Q3 2005 Revenue and Profits Primarily Impacted by Delay in Revenue Recognition Related to mVision Contract

- The Company Is Also Evaluating Its Long-Lived Assets for Possible Impairment

- Company Will Hold a Conference Call at 2:00 p.m. PDT/ 5:00 p.m. EDT Today to Discuss its Preliminary Results

(Photo: )

The Company attributes the revenue shortfall primarily to the delay in
recognition of approximately $40 million in revenues related to a contract
with Softbank BB for its mVision, IPTV solution. Due to the high-margin
nature of the mVision product, this delay is expected to have a meaningful
impact on overall gross margins for the quarter. In addition, overall third
quarter gross margins were also negatively impacted by other factors,
principally, the recording of additional warranty reserves in the broadband
business segment. As such, gross margins are expected to be approximately 9%
to 11%. Previous guidance called for gross margins in the range of 15% to 18%.

'While we are disappointed that revenues from this contract are being
pushed out from the third quarter, this is primarily a timing issue,' said

Hong Lu, chief executive officer and president of UTStarcom. 'UTStarcom has
been shipping mVision to Softbank BB since early 2005, and we are pleased with
the performance of our product to date. Softbank BB launched its commercial
IPTV network in July of this year, and we are currently in discussions with
them for two mVision expansion contracts.'

These results are preliminary, and therefore, subject to the Company's
completion of the customary quarterly closing and review procedures.
UTStarcom is scheduled to release its final third quarter results, and to
provide guidance for the fourth quarter of 2005, on November 3, 2005.

'Although we are still going through the quarter-end close process, we
wanted to make this announcement as early as possible,' added
Fran Barton,
executive vice president and chief financial officer of UTStarcom. 'Despite
the revenue and margin shortfalls, we are pleased with the strong cash flow
from operations in the third quarter as cash collections were better than

Potential Asset Impairment Charges

During management's strategic planning meetings in September, the Company
determined that circumstances may have changed sufficiently to indicate that
the fair value of some or all of its operating units may be below their book
values. As a result, the Company is currently conducting an evaluation of its
goodwill for impairment. If the fair values of these operating units are
concluded to be below their book values, the Company will record a non-cash
charge to write-off some or all of its goodwill. Additionally, the Company is
also assessing the value of its other long-lived assets including intangible
assets, deferred tax assets and property, plant and equipment. At the
conclusion of this assessment, the Company will determine if it will write-off
some of the book value of these assets. The Company expects to conclude the
evaluation as to the amounts of any impairment and reflect any such non-cash
charges in its third quarter results by its earnings conference call on
November 3rd.

SEC Inquiry

The Company has received notice of a formal inquiry by the staff of the
Securities & Exchange Commission into certain aspects of the Company's
financial disclosures during prior reporting periods. The Company is
cooperating with that inquiry.

Conference Call

UTStarcom's management will review the preliminary financial results for
the third quarter on a conference call scheduled for today, October 6, 2005 at
2:00 p.m. PDT/5:00 p.m. EDT. The conference call dial-in numbers are as
follows: United States -- 888-398-3046; International -- 706-634-2492. The
Conference Call ID is 1242029.

A replay of the call will be available from approximately 5:00 p.m. PDT,
Thursday, October 6, 2005 to 12:00 a.m. PDT, Friday, October 14, 2005. The
conference call replay numbers are as follows: United States -- 800-642-1687;
International -- 706-645-9291. The Conference Call ID is 1242029.

Investors will also have the opportunity to listen to the conference call
and the replay over the Internet through UTStarcom's Web site at:

To listen to the live call, please go to the Web site at least 15 minutes
early to register and to download and install any necessary audio software.
For those who cannot listen to the live broadcast, a replay will also be
available on this site.

About UTStarcom, Inc.

UTStarcom is a global leader in IP-based, end-to-end networking solutions
and international service and support. The company sells its broadband,
wireless, and handset solutions to operators in both emerging and established
telecommunications markets around the world. UTStarcom enables its customers
to rapidly deploy revenue-generating access services using their existing
infrastructure, while providing a migration path to cost-efficient, end-to-end
IP networks. Founded in 1991 and headquartered in Alameda, California, the
company has research and design operations in the United States, China, Korea
and India. UTStarcom is a FORTUNE 1000 company.

For more information about UTStarcom, visit the company's Web site at

Forward-Looking Statements

This release includes forward-looking statements, including the foregoing
statements regarding the guidance given for anticipated revenue and gross
margins for the third quarter of 2005, the anticipated ability to recognize
revenue from a specified transaction, the anticipated expansion of contracts
with customers, the anticipated timing for the Company to release its final
financial results for the third quarter of 2005 and guidance for the fourth
quarter of 2005, the anticipated fair value of the Company's operating units,
as well as the prospect, and potential amount of goodwill write-off that the
Company may record, the anticipated recoverability of certain long-lived
assets, as well as the prospect, and potential amount of related write-offs
that the Company may record, and the anticipated timing for the Company to
complete its conclusion with respect to potential write-offs. These
statements are forward-looking in nature and subject to risks and
uncertainties that may cause actual results to differ materially. These risk
factors include possible accounting entries and adjustments that may be made
to the Company's financial statements as part of the close of the books for
the quarter ended September 30, 2005. These risk factors also include rapidly
changing technology, the changing nature of global telecommunications markets,
the termination of significant contracts, the direction and results of future
research and development efforts, evolving product and applications standards,
reduction or delays in system deployments, product transitions, potential non-
realization of backlog, changes in demand for and acceptance of the Company's
products, general adverse economic conditions, and trends and uncertainties
such as changes in government regulation and licensing requirements. The
Company also refers readers to the risk factors identified in its latest
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K, as filed with the Securities and Exchange Commission.

SOURCE UTStarcom, Inc.