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The Center for Financial Research and Analysis (CFRA) is investigating (Barrons subscription required) questionable financial practices at telecom equipment maker, UTStarcom (ticker: UTSI). Here are the key points:

Warning of troubles in 2003:

  • CFRA warned clients in 2003, when UTSI was trading at $45, about the possibility of a
    slowdown in
    future earnings and revenues.
  • CFRA reiterated its concerns in 2004 due to UTSI's over-dependence on the Chinese market, growing
    off-balance sheet liabilities and a surge in accounts receivable. Those
    were increasing faster than revenues.
  • When receivables rise faster than sales it reflects the possibility that revenues may have accelerated during the current period at the expense of future periods.

Latest CFRA report (2 weeks ago):

  • CFRA warned that the company was attempting to "mask weakness in
    its core business" by restructuring a business contract with Japan
    Telecom, and was depending on acquisitions to revive its waning growth.
    According to CFRA, the company's "organic growth" is diminishing.

UTSI's stock market performance:


Source: Barron's report warns UTStarcom (UTSI) investors