UTStarcom Warns Again

The wireless gear company says its business in China remains weak.
Author:
Publish date:

Updated from Jan. 6

UTStarcom

(UTSI) - Get Report

plunged 18% after warning of a fourth-quarter earnings shortfall.

The Alameda, Calif., maker of short-range wireless communications gear said late Thursday that it would post a steep fourth-quarter loss on disappointing sales, due in large measure to continuing problems in its core networking business in China.

"Clearly we are disappointed with our performance in China this quarter," said CEO Hong Lu. "The primary reason behind the lower than expected financial results was the challenging market environment that UTStarcom faced in the region."

The company said big customers China Telecom and China Netcom "did not implement the anticipated increase in promotional spending at year-end that UTStarcom has benefited from historically."

UTStarcom said it would lose 40-45 cents a share in the quarter on revenue of $740 million-$745 million. Analysts were expecting a break-even fourth quarter on sales of $864 million.

The company also guided for lower sales in the first quarter, calling for revenue as low as $775 million. Analysts had been expecting $810 million in sales for the first quarter.

"Clearly, we have gone through a period of volatility associated with our transformation, and this quarter's slow-down in the China business was much greater than we had anticipated," said CFO Mike Sophie in a press release.

News of the preannouncement was reported earlier Thursday in

TheStreet.com

. Shares of UTStarcom fell 3% to $19.94 in Thursday afternoon trading amid rumors that UTStarcom would come up short on sales for the quarter ended last week.

In after-hours action, the stock dropped $3.74 to $16.20. UTStarcom held those reduced levels in early trading Friday.

The shortfall is hardly novel to UTStarcom investors. In September, UTStarcom shares plunged 10% after the company slashed 2004 revenue guidance, citing weakening demand in China and the deferral of revenue into 2005.

UTStarcom said in September that it expected 2004 revenue of $2.75 billion, including $200 million from its purchase of

Audiovox

(VOXX) - Get Report

. Wall Street analysts on average had expected 2004 revenue of $2.93 billion, according to Reuters Estimates.

UTStarcom said at the time that it was reiterating its 2005 forecast for earnings of $2 to $2.20 per share on revenue of $4 billion to $4.3 billion.

September's warning pushed the stock down into the low teens, well below the $30 or so shares fetched in the wake of the announcement of the Audiovox deal in the spring.