Saturday, May 9, 2009

Q1 2009 Earnings Call

Revenues and earnings missed already lowered guidance for Q1. The book to bill was 1.2 on core products but what does that consist of and what is the overall dollar amount?

Here are a sampling of words used in the call...successful, pleased, ahead of internal expectations, continued progress, as expected, significant step, highlights, strong demand, strong position.

Then the reality of "actual and real" charges and losses sets in and instead of providing guidance for Q2 and the rest of the year, Peter mentions that there will be a call at the end of the month to discuss initiatives. Peter states that they had initially targetted ending the year with an opex run rate of $60m/quarter and be profitable "sometime" in 2010. But I guess that wasn't good enough with management, the board, and surprise ....investors. They are "evaluating" initiatives to "accelerate" the above.

Peter made a few key points around this announcement of evaluating initiatives:

1. Demand for key products in China/India continue to be good. (I KNOW I've heard that somewhere before)
2. This demand is consistent with internal projections as shown in the Q1 bookings and Q2 is tracking accordingly. (Very frightening if the bookings are so low dollar amount and it is tracking or above their projections)
3. Expense reductions "well ahead of time frame" (Again, sounds good if the time frame is 2005!)
4. The above gives them confidence in executing on the new initiatives to be announced (maybe the initiatives are like their bonus metrics that they can scale them with a broken foot)
5. Cash levels of $301m (and not a peep of a buyback.....amazing)

EVEN for this company, the call was bizarre and we've seen a lot during the last 4 years!

Other fun facts. The company added a monster 50k iptv subscribers to get to 1.32m subscribers and Taiwan just went live in April 2009. Great...wait..Is that the same contract announced in December .......of 2007! There were also "recycled" contracts from Yemen, Philippines, cable iptv, digital signage (4.8k units....thats 4800 and not 4.8m or 480k but 4.8k units....m or k, its just fine print).

Anyway, the $301m in cash + another $10m coming from the PCD escrow may be "enough" of a buffer for the rest of the year.....maybe.

I'm hoping that this soap opera ends with a buyout and soon. The insiders have a ton of options/shares and their golden parachutes. Does Lu really want to be voted out and face shareholders this June? Maybe all their experience selling non-core assets and the entire company back in 2006/2007 have someone saying how much for the rest of the company now? Didn't the board give as a reason that buyers in 2006/2007 only wanted the "core" buisiness? If that was attractive then, well at $1.64, maybe they are more attractive.

BTW, spending $11m (thats in American dollars) a year for accounting is reasonable (maybe for a $1b company and not a $200m company!)....NOT.

Ok, so the soap opera continues and another event is scheduled at the end of the month. I hope Lu can get more support than the boards 7m shares and Softbanks 14m. For his sake, because thats nowhere close to being elected -- unless of course, the $11m in fees the accounting firm is getting has a little part for ballot tallying :-) (BTW, I wonder how Peter is voting?.....maybe Peter should vote with us shareholders unless he wants to be voted out next year....by Lu)

Seriously, the operational route is getting to the end of the line and the best way to extract shareholder value is by calling Goldman and saying get what you can (if you haven't figured it out by now, GS is very good in deals :-) ($13b extracted from the insolvent AIG via tax payers..nice)(Advise/suggestion to company....get Goldman on your side - give them whatever they want. Rename your company UTStracom-Goldman or better yet GoldmanStarcom or maybe just Goldman-networking....

Finally, I am a UT shareholder and I hope to get your vote.......in voting against Hong Lu.

Have a good weekend.