No terms of the discussions were available, but the back-and-forth heated up in recent weeks after UTStarcom put a bigger bid on the table. Analysts estimate that the handset business -- known as Audiovox Communications -- could fetch as much as $200 million. There is also a chance that other bids may be tendered or that both suitors could walk away from a deal.
Representatives of Hauppauge, N.Y.-based Audiovox and Alameda, Calif.-based UTStarcom declined to comment.
UTStarcom, which has had success selling systems for portable local phone service in China, has been looking to expand into other areas of wireless technology. Industry observers say the Audiovox deal would give UTStarcom an immediate entry into the hot code division multiple access, or CDMA, cell-phone market.
Audiovox put the cell-phone business on the block in February, after it entered a nonbinding agreement to sell the unit to Curitel for an undisclosed amount. Audiovox then hired Jefferies & Co. to find a higher bid.
Word that UTStarcom was exploring the purchase of the Audiovox handset division was first reported in TheStreet.com's Tech Edge newsletter on March 16.
Audiovox distributes phones made by Toshiba and Curitel in the U.S. under the Audiovox name. Industry watchers say Audiovox offers a complete handset operation, from supply to distribution. Most important, it boasts a direct relationship with Verizon Wireless, the nation's largest cell-phone service.
Analysts note that margins on phone distribution are thin, and the handset operation would make more sense as part of a larger phone business. Audiovox could cash out on the sales at a time when cell-phone sales are reaching record-high levels, allowing the company to focus on its remaining electronics division, which includes a growing portable DVD player business.