UTStarcom loses $3.7 million in first quarter

UTStarcom can't wait finally be rid of its "underperforming" IPTV equipment business, which it divested in the third quarter of last year but which, even though unreported, continued to impact current earnings.

Taking everything into account, the China-based company posted a first quarter operating loss of $3.7 million compared to operating loss of $3.8 million for the corresponding period in 2012. Total revenues for the first quarter of 2013 were $37.2 million, a decrease of 20.3 percent from $46.7 million for the corresponding period in 2012 and gross profit was $11.7 million and gross margin was 31.4 percent for the first quarter of 2013, compared to $18.4 million and 39.5 percent, respectively, for the corresponding period in 2012.

Those numbers should improve as the company moves forward on a new digital IP platform, promised CEO William Wong in a conversation with analysts.

"We are now well along two full quarters in rolling out a strategic plan that we initiated as divesting the underperforming IPTV equipment business," Wong said.

The company's new plan "centers on establishing a TV-over-IP services platform through internal development (and) the acquisition of new technologies," Wong said. "This platform will turn UTStarcom into a leading provider of high-in-demand digital content, including local content for which there continues to be a strong demand as well as premium licensed studio content, Internet content and other value-added services."

UTStarcom has high hopes for this new direction which it expects will "become the major contributor for UTStarcom by 2015 as the gross margins in that part of the business are expected to be exceeding 50 percent," Wong continued. "Everything that we see in the market today reassures us that these goals are indeed attainable with the business model we are pursuing."

It's just that it's taking time and money to get to that new business model, which includes a relationship with iTV Media and aioTV, both TV-over-IP service providers in the Asian region.

In the first quarter, the number of subscribers of iTV's offering in Thailand exceeded 30,000," Wong said, noting that this "shows the strong demand for these services as consumers seek a more personalized and mobile video experience."

UTStarcom last November acquired "a significant minority ownership stake" in aioTV, an all-digital media provider with a solution to deliver both live and on-demand video content through a consumer-customizable portal for various connected devices.

This, Wong said, plays into UTStarcom's belief that "cable and broadband service providers and broadcasters are increasingly eager to integrate TV-over-IP technologies and services into their systems to deploy rich content on demand to a variety of devices."

For more:
- Seeking Alpha has this earnings call transcript
- see this earnings release

Special Report: Wireline telecom earnings in the first quarter of 2013

Related articles:
UTStarcom prepares for business after IPTV
UTStarcom divests 'non-strategic' IPTV equipment business