Wednesday, June 10, 2009

UTStarcom Cuts Jobs by 50%, Narrows Focus to China, India

UTStarcom announced a broad corporate restructuring under which it will reduce employment levels by 50% and focus its remaining resources on the products and regions likely to drive revenue growth and where it holds a competitive advantage. The company's initiatives will bring its annualized operating expenses below $100 million representing a greater than 50% reduction from current levels.

By the end of this year, UTStarcom will reduce the employee headcount to less than 2,000 marking a greater than 50% reduction from the current level. The company expects the majority of these measures will be initiated in the third quarter of 2009 and will be completed by the end of the fourth quarter 2009.

UTStarcom will also outsource its manufacturing operation to benefit from a variable cost business model and improve the company's cash flow cycles.

The company plans to optimize its R&D spending by focusing on selected products. R&D remains a strategic priority for UTStarcom and it will continue to invest in products with technological differentiation likely to drive revenue growth and improved gross margins.

The company plans to aggressively rationalize its facility locations and general administrative costs while maintaining a strategic presence in the most attractive markets.

"Today's announcement represents a significant change in our business model. Collectively, these initiatives are aimed at returning UTStarcom to profitability as quickly as possible," said Peter Blackmore, UTStarcom's CEO and president. "However, it does not fundamentally change our strategy which continues to focus on IP-based products in our major markets of China and India. We remain committed to maintaining our essential R&D and sales capabilities to help us achieve growth in our IP-based infrastructure products."

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