Comparing to what happened to Chinese stocks listed on U. S. stock exchanges, the drop in major U. S. equity indexes is minor, though the Dow Jones Industrial Average did lose more than 10% in just one month (10.19%). During the same time period, the NASDAQ dropped 9.12% and the S&P declined 8.57% as jitters in the financial sector continued and there was no sign that the housing market has bottomed. In fact, the loss in June was the severest monthly loss since the Great Depression.

However,  if you are investing heavily in Chinese ADRs (like me), then I am sure you feel even more depressed when looking at your stocks’ performances last month. Of the 82 Chinese ADRs I track regularly, only 6 of them ended the month in the positive territory. All other 76 stocks dropped, and they dropped like a rock: 30 stocks lost more than 20% and 10 more than 30%.

Q1 2008 Earnings Call

• MGM mulls Manhattan. MGM Mirage (MGM) and Dubai World may join to buy Harry Macklowe's Drake Hotel site. The partners would assume $580M in defaulted debt and interest, and probably pay another $200M for the East 56th and Park Ave. site. "A Park Avenue address is prestigious and well regarded from a global perspective, and a globally recognized brand would be a good combination," hotel investment broker Mark Gordon says.
• Can Icahn seize Yahoo? Carl Icahn unveiled his Yahoo (YHOO) proxy slate (including Dallas Mavericks owner Mark Cuban), while Yahoo defended its board and its handling of the Microsoft (MSFT) bid. Paulson & Co. hedge fund said it bought 50M shares of Yahoo during Q1, and plans to back Icahn's dissident slate. Some think the group may already control as much as 30% of the proxy vote.
• Yahoo pressing Google alliance. Yahoo (YHOO) is in a big rush to seal a search-advertising pact with Google (GOOG), in part due to the pressure of Carl Icahn's play for its board. The companies say their planned "open platform" will allow others to serve up ads tied to keyword searches (this in order to overcome regulatory issues). But some analysts think the deal's structure creates a false sense of a level playing field that will in fact be dominated by Google.
• Weak data won't go away. Thursday's economic data kept recessionary concerns on the front burner. Industrial production fell 0.7% amid a 8.2% drop in motor vehicle output. Capacity utilization at manufacturers fell to 79.7% from 80.4% a month ago. The Empire State Manufacturing Survey fell to -3.23 from +0.63, while the Philly Fed's general business-conditions index improved to -15.6 from -24.9, although it remains in contractionary territory. Initial claims fell 1,000 to 365,750. Homebuilder confidence fell to 19 from 20 the past three months.
• More scrutiny at American Airlines. The FAA wants to know why American Airlines (AMR) mechanics were told to skimp on safety checks for damage due to lightening. American seems confident the move was permissible; if it's wrong, it could face stiff fines.
• Macy's banks on child's play. Macy's will announce plans to open FAO Schwarz toy boutiques in each of the 685 stores that carry kids clothing. Macy's says the deal will drive traffic. The big question is can FAO retain its exclusive image amid such huge expansion?
• Carmakers settle with CAW. GM (GM) and Chrysler (DIA) settled with the Canadian Auto Workers union in a deal very similar to the one hammered out by Ford (F) two weeks ago -- even though the two initially said Ford got the short shrift. CAW president Buzz Hargrove says he moved quickly, because things are only going to get worse from here on.
• Libor in focus. Fed officials and London traders who play a role in setting the Libor are in contact amid concerns the ubiquitous rate is lowballing the true rate banks are borrowing at.
• Lockheed locks up $1.5B gov't deal. As had been speculated, Lockheed Martin (LMT) won a $1.4B U.S. Air Force contract to build the next-generation Global Positioning System Space System program, known as GPS III. ITT (ITT) and General Dynamics (GD) are also participating in the project.
• Bernanke urges banks to borrow. Fed Chairman Bernanke is happy banks are having an easier time of raising funds, and wants them to keep doing so to repair their balance sheets and support new economic expansion. The most recent Treasurys offered by the Fed's new program drew just $7.24B in bids on an offer of $25B.
• Rio Tinto faces China censure. Chinese steelmakers may boycott Rio Tinto (RTP) amid accusations Rio is limiting contract-supplied iron ore in order to force them to buy at higher spot-market prices. A boycott could open up the door for smaller firms to break the virtual China iron-ore monopoly of Rio, BHP Billiton (BHP) and Vale (RIO).

Earnings: Thursday After Close

• Advance Auto Parts (AAP): Q1 EPS of $0.86 beats consensus of $0.78. Revenue of $1.53B in-line. Announces $250M share repurchase program to replace a $500M program which had $105M remaining. Shares: +8.75%.
• Autodesk (ADSK): Q1 EPS of $0.50 beats consensus of $0.48. Revenue of $599M vs. consensus of $589M. Sees Q2 EPS of $0.52-0.54 vs. consensus of $0.52. Shares: -0.4%.
• Beazer Homes (BZH): Q1 EPS of -$3.59 misses consensus of -$2.05. Revenue of $503M vs. consensus of $528M. Sees Q2 EPS of -$5.93, short of consensus of -$1.01, and revenue of $405M vs. consensus of $483M. Shares: -5.2%.
• BMC Software (BMC): FQ4 EPS of $0.63 beats consensus of $0.51. Revenue of $467M vs. consensus of $460M. Sees full-year 2009 EPS of $2.10-2.20, better than consensus of $2.09. Shares: +4.3%.
• Compuware (CPWR): FQ4 EPS of $0.23 beats consensus of $0.21. Revenue of $339M vs. consensus of $332M. Shares: -2.7%.
• General Steel (GSI): Q1 EPS of $0.06 misses consensus of $0.13. Revenue of $292M vs. consensus of $282M. Shares: -21.8%.
• Giant Interactive (GA): Q1 EPS of $0.20 beats consensus of $0.16. Revenue of $67.3M vs. consensus of $63.1M. Shares: -3.9%.
• Kohl's (KSS): Q1 EPS of $0.49 beats consensus of $0.44. Revenue of $3.6B in-line. Sees Q2 EPS of $0.70-0.74, in-line, and full-year EPS of $2.95-3.15, short of consensus of $3.11. Shares: -1%.
• Nordstrom (JWN): Q1 EPS of $0.54 beats consensus of $0.49. Revenue of $1.88B in-line. Sees full-year EPS of $2.65-2.80, short of consensus of $2.76 and down from a previous $2.75-2.90. Shares: +1.2%
• Quantum (QTM): FQ4 EPS of -$0.08 misses consensus of $0.04. Revenue of $229M vs. consensus of $241M. Shares: -10.1%.
• UTStarcom (UTSI): Q1 EPS of $0.21 beats consensus of -$0.10. Revenue of $586M vs. consensus of $550M. Shares: +4.6%.

Earnings: Friday Before Open

• Abercrombie & Fitch (ANF): Q1 EPS of $0.69 beats consensus of $0.65. Revenue of $800M vs. consensus of $808M. Same-store sales were down 3% from a year ago.
• Fairpoint (FRP): Q1 EPS of $0.19 beats consensus of $0.00. Revenue of $282M vs. consensus $143M.

Today's Markets

• In Asia Friday: Nikkei -0.23% to 14,219. Hang Seng +0.41% to 25,619. Shanghai -0.36% to 3,624. BSE Sensex +0.47% to 17,435.
• European markets are broadly higher at midday. FTSE +1.43% to 6,341. CAC +0.74% to 5,095. DAX +1.79% to 7,202.
• U.S. futures are up slightly from Thursday's close. Dow +0.11% to 13,009. S&P +0.18% to 1,427. Nasdaq +0.14% to 2,038.50.
• Gold is 0.98% higher to $888.40. Oil is up 1.78% to $126.35.

Internet

Chinese stocks listed on U.S. stock exchanges had another rough month in February. Of the 84 Chinese ADRs I track, winners and losers are virtually evenly split: 43 had a losing month while another 41 gained. Biggest losers again were alternative energy stocks, with Suntech Power (STP) leading the way with a drop of nearly 32%.

However, unlikely the month of January when most Chinese ADRs lost a big chunk of their market value, February saw some nice rebound in Chinese issues with several stocks gaining as much as 50% last month. During the same time period, Hong Kong’s Hang Seng Index (^HSI) rose 876 points, or 3.74% and Shanghai Composite Index (^SSEC) declined 35 points, or 0.8%. The Bank of New York Chinese ADR Index (^BKCN) added 8 points, or 1.69%.

UTStarcom, Inc. (UTSI)

Q4 2007 Earnings Call

‘Tis the season for snow, Santa and shopping till you drop. Merchants across the country are currently in the midst of their busiest season of the year. The wireless industry is no exception, hoping to draw consumer interest (and dollars) from new product launches, bundled deals and blitz advertising campaigns. Q4 2006 saw a 14% increase in mobile phones sales from the previous year. Will this trend continue in 2007? To find out, Compete ranked mobile phone interest by measuring the number of times visitors to major carrier websites viewed detail for specific phone models in the month of November. Models with multiple colors and styles available were not combined.

For traders with a more short term time horizon, we have compiled a list of the S&P 1500 stocks which have the largest intraday high low ranges [based on the average percent spread between the intraday high and low for the last fifty days]. We then grouped the stocks based on whether they have a rising or falling fifty-day moving average. Tickers highlighted in gray indicate that the stock is new this month to the list. Reflecting the state of the market, this month's list is dominated with stocks from housing and finance related sectors that are all in downtrends.

click to enlarge

UTStarcom, Inc. (UTSI)

Q3 2007 Earnings Call

Investing in UTStarcom (UTSI) has been a nightmare for shareholders who have held this stock between 2003 and today. The stock had steadily dropped from the low $40s per share to just $3 as of Tuesday November 6th , 2007, bringing the company's market cap from over $5 billion dollars to the $350 million range, or over $4.7 billion in lost shareholder wealth in the last four years.

The massive decline in the stock price is the result of a multitude of events, some external and some self inflected. The major blow to the company performance has been the phasing out of its Personal Access Technology (PAS) by the Chinese telecom operators (China Telecom (CHA) and China Netcom (CN); in the late 90s and early 2000s, the Chinese fixed-line telecom players opted to use UTStarcom's Japanese borrowed technology as a away to offer limited mobility to their clients since they lacked a mobile license; as a result, demand for the low price PAS exploded, reaching at a certain point over 20% of the fixed-line operators voice revenues.

For traders with a more short term time horizon, we have compiled a list of the S&P 1,500 stocks which have the largest intraday high/low ranges (based on the average percent spread between the intraday high and low for the last fifty days). We then grouped the stocks based on whether they have a rising or falling fifty day moving average. Tickers highlighted in gray are new to the list since last month's screen.

As this month's screen highlights, the list is dominated by stocks in the housing related sector, and while some of these names have had strong gains in the last couple of weeks, the rallies aren't enough to reverse their longer term downtrends.

For traders with a more short term time horizon, we have compiled a list of the S&P 1500 stocks which have the largest intraday high low ranges (based on the average percent spread between the intraday high and low for the last fifty days). We then grouped the stocks based on whether they have a rising or falling fifty day moving average. Tickers highlighted in gray indicate that the stock is new this week to the list.

Reflecting the state of the market, this month's list is dominated with stocks in downtrends, indicating that not much money is being made trying to catch intraday moves on the long side.

Hickey and Walters (Bespoke) submit: For traders with a more short term time horizon, we have compiled our list of the S&P 1500 stocks which have the largest intraday ranges (based on the average percent spread between the intraday high and low for the last fifty days).

We then grouped the stocks based on whether they have a rising or falling 50-day moving average. Tickers highlighted in gray indicate the stock is new to the list this week. Illustrating the recent weakness in the market, only eleven of the stocks highlighted have rising 50-day moving averages, while 39 stocks have declining moving averages.

Hickey and Walters (Bespoke) submit: For traders with a more short term time horizon, we have compiled a list of the S&P 1500 stocks which have the largest intraday high-low ranges (based on the average percent spread between the intraday high and low for the last fifty days). We then grouped the stocks based on whether they have a rising or falling 50-day moving average.

Stocks highlighted in gray are new to the list this week.

In the latest chapter in the story, the company Tuesday disclosed that it has begun “an independent review of historical sales contracts with some of its customers in China.” In an interview with Tech Trader Daily, Chesha Kamieniecki, director of investor relations, says the issues revolve around revenue recognition. Kamieniecki explains that the company is looking at whether in some cases revenue was recorded prematurely, resulting in orders being booked in the wrong quarter (the company books revenue on “final acceptance” by its customers, but in some cases deals may have been declared final when they actually weren’t).

She says there has been “no determination” as to whether the revenue recognition issues were intentional or not. Kamienicki notes that some of the contracts being examined are 3, 4 or 5 years old, and involved managers in China who are no longer with the company.

UTStarcom Flaming Out by Mark Veverka

Summary: Barron's Plugged In editor Mark Veverka is ready to throw in the towel on wireless equipment/technology company UTStarcom Inc. (UTSI). Due to ongoing SEC and internal investigations (options backdating, insider trading and bribery), the company has published no meaningful information for one year. On June 1, co-founder Ying Wu mysteriously resigned over differences of opinion regarding strategy. He's now free to sell his 4.7 million share stake. Wu was seen as the key link between the company and Chinese bureaucrats and business leaders, and was slated to become UTStarcom's next CEO. Shares are down 21% to $5.71 since then. Before ceasing to publish financial info, sales were slipping. UTStarcom's internet video technology will be on display this week, but critics say the new product is weak. Prices of high-end phones from China Mobile Ltd. (CHL) are dropping, increasing the pressure.

Consider the conclusions of the following strategic alternatives processes:

Let’s take a quick look at the state of the photon.

Korea - 20M homes by 2010, $5B dollar investment. The fact they are wiring up at $250 a home indicates heavy VDSL use though I have not confirmed this. Equipment supplied domestically, chips provided by both PMC-Sierra (PMCS) and Teknovus.

Japan - 30M homes by 2010, moving away from VDSL as an access technology and going fiber all-the-way. This should substantially increase the amount of ONU chips required - up until now a large proportion of NTT’s (NTT) FTTH installs were really fiber to the basement [FTTB] with VDSL reaching the last 100m or so. Equipment still 100% Japanese, and chipset still nearly 100% PMC-Sierra (with a sprinkling of OKI ASICs and Teknovus)

Taiwan - Chungwa Telecom (CHT) spending $1.84B to connect around 2M residences. Going GE-PON, and word is Teknovus is supplying the chips.

China - Huge opportunity. China Telecom (CHA) indicating 20M installs initially but I feel demographics favor much larger numbers in the long run (see “The Future of FTTH in China"). It is hard to believe the equipment will be sourced from Japan, so expect to see Huawei, ZTE, UT Starcom (UTSI), and Fiberhome share in the spoils. I have heard the traditional western players like Alcatel (ALU) are out due to lack of mature GE-PON products - they all invested in G-PON.

USA - Verizon going full guns with 6.8M homes passed already, and 18M passed by 2010. That’s about 50% of it’s installed base. Verizon projects 4M customers in 2010. Equipment supplied by Tellabs (TLAB), transitioning to Alcatel and Tellabs (maybe helloMoto too?) when they make the jump to G-PON from B-PON.

Europe - France deploying FTTH in pockets (see “FTTH vs. VDSL in France“) and Amsterdam pursuing muni-fiber. British Telecom (BT) has ruled out FTTH, and Deutsche Telekom (DT) is going with VDSL. From my perspective, more heat than light on FTTH in Europe.

This is all not good for suppliers of G-PON equipment and components. Word on the street is AMCC (AMCC) has canceled their GPON development, something anticipated here 15 months ago (see “AMCC Demonstrates GPON MAC“). Broadlight and Freescale are the only ones with any hope of seeing substantial GPON chipset volumes in the next 3 years.

New 5%+ positions:

That’s a lot of stuff that someone was hoping nobody would read, or at least that it would be forgotten about by the time the markets opened yesterday. But that doesn’t appear to be the case with UT Starcom (UTSI) which disclosed in this 8-K (filed at 5:02) that its president and CEO, Hong Lu, had received a Wells notice from the SEC that appears to be related to insider trading. As Eric Savitz reported late Friday, the "news" was buried in this cheery-sounding press release. Yesterday, UTSI stock was down about 4%.