UTStarcom Inc. posted a loss in the second quarter, and its third-quarter outlook offered no relief, news that helped send its stock down more than 6 percent to around $8 per share.
“While we had hoped that the downward revisions to revenue growth and expectations for the past several quarters were behind UTStarcom, this is clearly not the case,” wrote Jason Tsai with ThinkEquity Partners in a note to investors. The firm makes a market in UTStarcom securities.
UTStarcom posted revenues of $723 million, up 5 percent over the same quarter last year. However, the company reversed its year-ago net income of $43.9 million with a loss of $74.7 million. UTStarcom scored much of its successes in the second quarter from its handset business, which it recently acquired from Audiovox Communications Corp. The company’s handset business contributed $342 million in revenues during the quarter.
Tsai said UTStarcom’s failings were partially due to challenges in its fiber and PAS businesses. Tsai said PAS technology may have a limited future in China due to the pending launch of third-generation networks there.
Further, the company’s outlook for the third quarter came in way below Wall Street expectations. The company said it will earn revenues of between $660 million and $680 million on a loss of between 35 cents and 40 cents per share. Analysts polled by Thomson Financial Network predicted the company would record $778 million in revenues and a loss of only 8 cents per share in the third quarter.
“This was a constructive quarter for UTStarcom,” said Hong Lu, the company’s president and chief executive officer. “Our primary focus was on the restructuring plan that we announced in early May. The plan is designed to realign our cost structure with the changing dynamics of our key markets in order to bring the company back to consistent and sustainable levels of profitability. I believe that we have made significant progress in our restructuring initiatives and expect to complete the implementation of the plan in the third quarter of 2005.”
UTStarcom said it has fired almost 1,000 workers as part of its restructuring.
