Saturday, October 3, 2009

Conference Call with Peter Blackmore

Earlier in the week, I had a conference call with Peter Blackmore, UTStarcom CEO and Barry Hutton, Senior IR for the company. Peter had just come back from a three week trip from China (and also recently in Japan). I had some concerns with the management situation of the company (among other things) and Peter allocated some time for a call this week before going back to China again. Here are the items that were discussed.

Management Team - With Hong Lu stepping down from his executive position, the departures of Robert Wu (China CEO) and Craig Samuel (UTStarcom CTO), the vacant COO and Viraj Patel’s Interim position, the management ranks seemed disorganized, light and was not positioned for the long term. Peter responded by highlighting Luis Dominguez (SVP) of International Sales, Marketing, and Services and the heads in India and Japan. He specially alluded to the company’s “move” to China and the executives based there, namely Charles Mah (SVP, China Sales, Marketing, and Services) and the business unit heads (Yanya Sheng/BBU, Dr. Baijun Zhao/MCBU, and K.P. Lim/VP Chief Quality Officer). Peter seemed very happy with the current transition/restructuring in China and discussed potentially rounding up the team with a COO.

I specifically wanted to discuss his hire of Craig Samuel. Peter mentioned that Craig Samuel was the #2 CTO guy at HP and would have liked to have kept him but due to the restructuring, parted ways.

I asked Peter if he was personally involved in any of the hiring in China and he mentioned not at the BU (business unit) level but just under. The BU heads have been with the company a while. Peter also mentioned hiring new sales people, some from Huawei and commented that he liked them because of their aggressiveness.

Bookings – I asked Peter why he did not discuss bookings (book to bill) in detail the last quarter like they do in previous years. Peter mentioned that book to bill was “positive” (I take that to mean >1) but they do not give breakdowns of the bookings. Barry commented that it is not simple to come up with a definitive number due to the way various contracts are set up. Peter added that international was “positive”. I definitely wanted to get a number and breakdown by BUs but the best I could do was a reassurance that they are not trying to hide anything and that business was tracking well. I asked about new contracts. It seems that some of the contracts we hear are very similar to previous ones and Peter said they definitely take a good amount of time to select which ones to discuss on the CC and that they are all new wins. This led to the next topic.

PRs – Why don’t we see more of these? Once every six months is hardly representative of the business. Barry mentioned they are working to improve on this end but even putting out PRs takes a tremendous amount of time (talking to various people/legal/sales/contracts in preparing the PRs) specially during the move back to China where resources are more constrained now. Again, I mentioned there has to be a middle ground where investors can get a more representative view of the business end. Peter mentioned an upcoming PR on an enterprise TN win coming up (more on TN later).

Taiwan IPTV – I wanted to get more information on the progress with Markwell since the original PR was in late 2007 and it only went “live” in May (which they announced in one of the CC this year). Peter mentioned that Taiwan iptv is not going to be anywhere as large as India/China. They do also have some broadband contracts with CHT in Taiwan that’s doing well, selling their MSTP product. (Got into a quick back/forth and said whats well? $2-3m? Peter mentioned more than that…). I also talked about DESCA and tried to get a ballpark revenue target but didn’t get a figure. Peter did mention DESCA’s main supplier was Cisco and I guess it was a good arrangement that they are also now a supplier.

Mobile IPTV- I asked about the competition with CMMB, the China mobile iptv standard that others are using for video. How competitive will UTs mobile iptv be against that when 30 other suppliers may go with the CMMB. Peter mentioned that they are also talking to other handset suppliers to license/use their mobile iptv software/system. How much is their handsets for mobile iptv. Peter mentioned it doesn’t take a major smart phone like the I-phone so the cost right now per handset is $150-200 (mid-tier pricing).

India BSNL Phase III – On track for Q4 – I didn’t bring this up but Peter talked about this as part of another discussion.

GPON – I mentioned to Peter about hearing they had presented GPON as part of their product lineup in a recent conference/marketing event. Peter mentioned that this must have been the China Telecom event where they were a major sponsor and he got to talk with many government officials. He said they are modifying their GEPON product to develop GPON as well but that the GPON product is not ready as of yet.

Transport Network (TN) Product –As part of the product discussions, we got to TN and Peter brought up Bill Huang, UT’s former CTO now with China Mobile. Peter mentioned that Bill Huang was quite impressed (not sure if that was the exact word) with UTs current product lineup/R&D and will be in discussions for the TN product in Q4. I asked do they have ANY contracts with China mobile now. Peter said no and that is due to their backing off the broadband market previously. Regarding TN, Peter mentioned that as usual, this market will be shared with ZTE, Huawei, and possibly another vendor. Peter mentioned that Softbank also had positive words for their TN product and its performing well. He added that China Telecom, which is their main customer for years is late in the TN area and is just in the pilot testing stage.

US Partner – I wanted to check with Peter if DESCA is the partner that he talked about in previous cc. He said no and that the technology partner he was talking about wants to sell UT products in the US. Peter mentioned the TN product in particular.

Being more “Chinese” – Towards the end, I discussed with Peter the situation with him being non-Chinese and the Western BOD meant that they are still perceived as handicapped and what they are doing. Peter mentioned (again) about looking into Chinese board members and looking potentially for a Chinese COO. Are there investors, partners, etc? No other comment on that front (not that I expected an answer but I’m sure other investors have discussed this with Peter). Peter mentioned he is working 15-16 hr days and has an apartment in China.

One of my last comments to Peter (and there were probably a lot of “last” comments) was that bottom line, the company’s business is being valued at zero (or less) so there is a lot of disappointed shareholders. Peter mentioned there is a lot of work still ahead. I thanked him for his time.

As I write this post, I think of other items such as IPTV discussions, the sale of the building, OPEX, PDSN, cash positions and other usual points of discussion but there is always just a limited amount of time and some topics just flow in certain directions.

Have a good weekend.