Troubled US-China vendor UTStarcom will cut 11% of its workforce as part of a restructuring plan as it tries to trade way out of difficulties.
The company yesterday unveiled its first financial result in more than a year, announcing net sales of 2006 of $2.5 billion, with gross margins for the full year 2006 of 15.7% and a net loss of $117.3 million, or $0.97 per share.
The result takes account of a $278 million restatement of all financial reporting since 2000 because of premature revenue recognition in the company's western China operation.
The restatement and yesterday's announcement cap a crisis-ridden 12 months for UTStarcom. In that time it was threatened with expulsion from Nasdaq for failing to file statements, did not to meet loan repayments, lost its China CEO and saw one of its founders charged with insider trading.
CFO Fran Barton said an independent counsel had investigated the revenue recognition issue and found that it did not impact the company's cash, only the timing, and would take up to eight years to unwind. The investigator concluded that senior management was not aware of any of the inaccurate reporting.
UTStarcom said in a statement it would will take a $10 million charge as a result of laying off 700 staff, mostly in China and the US, and save about $21 million annually.
Despite the problems, Barton says the company is making progress. Although it made a loss in 2006, UTStarcom improved cashflow by $66 million, increased its cash by $12 million and paid off $96 million in debt, he said in a conference call.
Chairman Hong Lu said going forward it would focus primarily on its IPTV and optical transport businesses - effectively giving much less emphasis to its PAS and handset operations. Lu said the optical and IPTV businesses were profitable and were maintaining market share.
The firm will file its 2007 Q1-Q3 results and give more detail on its 2008 business strategy in early November.