UTStarcom (Nasdaq: UTSI) is shedding its IPTV equipment business, turning it into a privately held standalone company as "a means of effectively redeploying capital to support higher return opportunities, particularly in the value-added services area," the Beijing-based vendor said.
CEO Jack Lu will leave his current position at UTStarcom to run the new company.
IPTV is estimated to account for about one third of UTStarcom's total revenue but "is expected to negatively contribute to the overall company results," the news release continued. Jettisoning the IPTV business, UTStarcom continued, means that it can concentrate on "higher growth business (that) will have an immediately positive effect on the company's margin structure and profitability profile."
IPTV, to put it frankly--as Xiaoping Li, lead independent director and chair of the strategy committee at UTStarcom did--is a "non-strategic business segment" that's "divestiture preserves the parts of the revenue base that have higher profitability and stable growth prospects."
Not that there's anything wrong with IPTV, of course. The divestiture "also provides excellent continuity for IPTV customers who can expect the same level of service and commitment from the new company," he continued.
As for Lu, Li said, "we believe he is the best candidate to lead the new business, bringing his passion, ability and vision to make the business an industry leader."
Lu has been with UTStarcom for two-plus years, during which time he "turned around the company after six years of losses," Li concluded.
- see the UTStarcom release
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