Wednesday, January 5, 2005

UTStarcom Cites Weakness in China for Revenue Shortfall

UTStarcom expects to report Q4 2004 revenue in the range of $740 million to $745 million, versus initial guidance of $875 million to $885 million. The company cited difficult market conditions in China as the primary reason behind the lower than expected financial results . The company said its China operations were adversely impacted by several factors, including an overall slowing of the Chinese economy, maturation of the PAS market, and decreased capital spending. In particular, UTStarcom said there were disruptions associated with changes in senior management at the main carriers in China, and the shift of decision-making away from regional entities and towards carrier headquarters, which caused delays in both the execution of contracts and final acceptances. In addition, both China Telecom and China Netcom did not implement the anticipated increase in promotional spending at year-end that UTStarcom has benefited from historically. Additional material was provided by the company in an investor conference call.

Hong Lu, chief executive officer and president of UTStarcom, said "The difficult environment that UTStarcom faced in China in the fourth quarter speaks to the importance of our aggressive globalization and product diversification strategy. We made important progress across many fronts in the fourth quarter and gained momentum with both our international and Audiovox businesses."

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