When I was at Financial World Magazine, we would do a list of the ten worst managed companies in America. The cycle was about once a year. To make the list, a company had to do a lot wrong compared to the rest of the stock market and its peer group. The financial results would have to be very poor, and companies in industries that were down across the board were usually not included. For this tech list, a number of financial sources were consulted along with research from Wall Street and sources like ValueLine, Morningstar, and Investor's Business Daily.
Going back two years, UTStarcom Inc. (NASD:UTSI) was one of the truly promising companies in the IP wireless and broadband businesses. The company had good footprints in broadband IPTV, VOIP Customer Premises Equipment, Wi-Fi equipment, mobile handsets, switching and other broadband equipment.
The company had a stock price of $30 and now trades at below $7 on most days:
The company's revenue, which hit $902 million in the March 31, 2005 quarter, dropped to $635 million in the September 30, 2005 period. Operating income went from $56 million in the March quarter to a loss of nearly $324 million in September. Even without non-recurring charges, the loss would have been about $100 million.
In March, the company was threatened with delisting by the Nasdaq Stock Market for failing to file its 10-K. The company said it is conducting an investigation about premature revenue recognition.
The company has given out preliminary revenue for Q4 05 of $635 million and an operating loss of about $21 million. Guidance for Q1 06 is for $505 to $535 million in revenue an a GAAP EPS loss of as much as $.75 a share. The preliminary number for Q4 was a loss of $.17 a share.
If the company did not have so many good products, IPTV contracts in China, and significant partnerships with companies like NEC (NASD:NIPNY), Mitsubishi Electric Corporation and Softbank (OTCPK:SFTBF), this would not be such a tragic collapse for investors.
But, it is.
UTSI 1-yr Chart
Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was also president of Switchboard.com when it was the 10th most visited website in the world, according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at firstname.lastname@example.org.
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