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UTStarcom Releases First Quarter 2006 Financial Results

ALAMEDA, Calif., June 21 /PRNewswire-FirstCall/ -- UTStarcom, Inc.
(Nasdaq: UTSI), a global leader in IP-based, end-to-end networking solutions
and services, today reported financial results for the first quarter of 2006.

UTStarcom Releases First Quarter 2006 Financial Results
UTStarcom Releases First Quarter 2006 Financial Results

First Quarter Revenues of $596.6 Million, Gross Margins of 20.5%, and Loss per Share of ($0.09)

Positive Cash Flow From Operations of Approximately $54 Million in the First Quarter


Net sales for the first quarter of 2006 were $596.6 million. Gross
margins for the first quarter were 20.5% and GAAP net loss for the quarter was
$10.6 million, or a loss of ($0.09) per share.

'While there is still a lot of work to be done, we are pleased with our
solid first quarter results. We believe they demonstrate progress toward our
planned improvements to gross margins, expenses, and cash-flows,' stated
, executive vice president and chief financial officer of UTStarcom.

The Company generated approximately $54 million of positive cash flow from
operations and paid down approximately $27 million in short-term debt during
the quarter.

'We will continue to strive to make improvements in our business
operations. We will also continue to drive our strategic focus to evolve our
product portfolio, build new customer relationships and to maintain our
technology and market leadership in key markets around the world,' added
, chief executive officer of UTStarcom.'

    Consolidated Second Quarter 2006 Guidance

    Total Revenues:                Approximately $545-$575 million
    Gross Profit Margin:           Total Company:  15-17%
    Operating Expenses:            Approximately: $141 million, including
                                   approximately $4 million in expenses
                                   associated with stock compensation
    GAAP EPS:                      Loss of approximately ($0.45) to ($0.55)

    Conference Call

The Company will conduct a conference call, which is open to the public,
to discuss these results. The call will take place today, June 21, 2006 at
1:30 p.m. (PDT). The conference call dial-in numbers are as follows: United
-- 888-398-3046; International -- 706-634-2492.

A replay of the call will be available from approximately 5:30 p.m. (PDT)
on June 21, 2006 to 11:59 p.m. (PDT) on June 28, 2006. The conference call
replay numbers are as follows: United States -- 800-642-1687; International --
706-645-9291. The Access Code is 2062973.

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 anticipated continued progress with respect to
business operation and execution, the anticipated improvement in the Company's
strategic focus and the resulting evolution of product portfolio, the
anticipated ability to build new customer relationships, the expectation that
the Company will be able to maintain its technology and market leadership in
key markets, and the guidance given for anticipated total revenues, gross
profit margin, operating expenses and earnings per share for the second
quarter of 2006. 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 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.

                               UTStarcom, Inc.
                      Condensed Consolidated Balance Sheets
                 (in thousands, except share and per share data)

                                                 March 31,        December 31,
                                                    2006              2005
     Current assets:
        Cash, cash equivalents and
         short-term investments                   $684,477          $658,837
        Accounts receivable, net                   494,988           522,964
        Notes receivable                             7,659             2,065
        Inventories, net                           424,028           425,955
        Deferred costs/Inventories at
         customer sites under contracts            246,678           239,876
        Prepaids                                    66,598            61,795
        Short-term restricted cash and
         investments                                69,078            53,680
        Other current assets                        36,677            37,267
     Total current assets                        2,030,183         2,002,439
     Property, plant and equipment, net            221,003           233,403
     Long-term investments                          25,643            26,023
     Goodwill                                        3,063             3,063
     Intangible assets, net                         70,389            75,313
     Other long-term assets                         25,235            25,811
          Total assets                          $2,375,516        $2,366,052

     Current liabilities:
        Accounts payable                          $339,865          $320,677
        Short-term debt                            172,141           198,826
        Income taxes payable                        31,708            33,608
        Customer advances                          265,359           221,301
        Deferred revenue                            86,681            69,030
        Other current liabilities                  243,888           289,867
     Total current liabilities                   1,139,642         1,133,309

     Long-term debt                                274,900           274,900
     Other long-term liabilities                    30,943            20,958
          Total liabilities                      1,445,485         1,429,167

     Minority interest in consolidated
      subsidiaries                                   7,852             8,338
     Stockholders' equity:
        Common stock: $0.00125 par value;
         authorized: 750,000,000 shares;
         issued and outstanding: 120,607,118
         and 120,585,158 at March 31, 2006
         and December 31, 2005, respectively           152               152
        Additional paid-in capital               1,166,519         1,168,166
        Deferred stock compensation                     --            (3,493)
        Retained earnings (accumulated
         deficit)                                 (263,809)         (253,174)
        Accumulated other comprehensive
         income                                     19,317            16,896
     Total stockholders' equity                    922,179           928,547
          Total liabilities, minority
           interest and stockholders'
           equity                               $2,375,516        $2,366,052

                               UTStarcom, Inc.
                 Condensed Consolidated Statement of Operations
                    (in thousands, except per share amounts)

                                                 Three months ended March 31,
                                                    2006              2005
                                                                  as restated
     Net sales                                    $596,571          $901,884
     Cost of sales                                 474,117           664,460
        Gross profit                               122,454           237,424

     Operating expenses:
        Selling, general and administrative         83,172           109,011
        Research and development                    46,309            66,260
        Amortization of intangible assets            4,925             6,972
          Total operating expenses                 134,406           182,243

     Operating (loss) earnings                     (11,952)           55,181

     Interest income (expense)                          32            (2,929)
     Other income (expense), net                     3,568            (6,847)
     (Loss) income before income taxes,
      minority interest and equity in
      loss of affiliated companies                  (8,352)           45,405
        Income tax expense                           2,839             7,680
        Minority interest in consolidated
         subsidiaries                                  556              (222)
        Equity in loss of affiliated
         companies                                      --              (459)
          Net (loss) income                       $(10,635)          $37,044

     Basic (loss) earnings per share                $(0.09)            $0.32
     Diluted (loss) earnings per share              $(0.09)            $0.29

     Weighted average shares used in
      per-share calculation:
       - Basic                                     120,600           114,523
       - Diluted                                   120,600           132,949

                               UTStarcom, Inc.
                Condensed Consolidated Statement of Cash Flows
                                (in thousands)

                                                  Three months ended March 31,
                                                       2006          2005
     CASH FLOWS FROM OPERATING ACTIVITIES:                        as restated
          Net (loss) income                         $(10,635)       $37,044
     Adjustments to reconcile net (loss)
      income to net cash provided by
      (used in) operating activities:
        Depreciation and amortization                 17,476         25,897
        Loss on sale and disposal of assets            4,708          1,278
        Stock compensation expense                     4,159            575
        Reversal of stock compensation due
         to terminations                              (2,390)            --
        Provision for doubtful accounts                  892         17,548
        Provision for inventory reserve                  795         15,160
        Other                                           (578)         1,769
        Changes in operating assets and
         liabilities, net of of acquisitions:
          Accounts receivable                         28,787       (120,621)
          Inventories                                 (4,337)       (15,724)
          Deferred costs/Inventories at customer
           sites under contracts                        (810)         3,533
          Other current and non-current assets        (6,771)        49,621
          Accounts payable                            18,077         33,429
          Income taxes payable                        (2,020)       (32,015)
          Customer advances                           43,097       (223,720)
          Deferred revenue                            14,207         28,016
          Other current liabilities                  (50,985)        (4,667)
            Net cash provided by (used in)
             operating activities                     53,672       (182,877)
        Additions to property, plant and equipment    (3,162)       (28,313)
        Purchase of business, net of cash acquired        --        (18,449)
        Sale of business                              19,965             --
        Change in restricted cash and investments    (17,037)         5,796
        Purchase of short-term investments           (10,819)      (101,194)
        Proceeds from sale of short-term
         investments                                  13,309        221,253
        Other                                            499            (18)
          Net cash provided by investing
           activities                                  2,755         79,075
        Proceeds from borrowings                      62,370        146,000
        Payments on borrowings                       (89,948)      (230,000)
        Other                                         (3,184)           667
          Net cash used in financing activities      (30,762)       (83,333)
     Effect of exchange rate changes on cash and
      cash equivalents                                 2,389         (2,683)
          Net increase (decrease) in cash and
           cash equivalents                           28,054       (189,818)
     Cash and cash equivalents at beginning of
      period                                         645,571        562,532
     Cash and cash equivalents at end of period     $673,625       $372,714

     Supplemental disclosure of cash flow
      Cash paid:
       Interest                                       $2,511         $5,104
       Income taxes                                   $3,801         $1,489
      Non-cash operating activity
       Accounts receivable transferred to notes
        receivable                                    $8,977         $9,394

SOURCE UTStarcom, Inc.