UTStarcom Reports Unaudited Third Quarter 2011 Financial Results

UTStarcom Reports Unaudited Third Quarter 2011 Financial Results

BEIJING, Nov. 9, 2011 /PRNewswire-Asia/ -- UTStarcom Holdings Corp. ("UTStarcom" or "the Company") (NASDAQ: UTSI), a leading provider of interactive, IP-based network solutions in iDTV, IPTV, Internet TV and Broadband for cable and telecom operators, today reported financial results for the third quarter ended September 30, 2011.

Third Quarter 2011 Highlights

-- Total revenues increased 35.7% year-over-year to $83.3 million in the
third quarter of 2011 from $61.4 million for the corresponding period of
2010.

-- Gross profit increased 164.2% year-over-year to $31.9 million in the
third quarter of 2011 from $12.1 million for the corresponding period of
2010.

-- Gross profit as a percentage of net sales, or gross margin, was 38.4% in
the third quarter of 2011, compared to 19.7% in the third quarter of
2010 and 37.6% in the second quarter of 2011.

-- Operating income was $14.2 million in the third quarter of 2011,
compared to an operating loss of $23.3 million for the corresponding
period of 2010.

-- Net income attributable to UTStarcom's shareholders was $8.0 million, or
basic earnings per share of $0.05, in the third quarter of 2011,
compared to a net loss of $17.2 million, or basic loss per share of
$0.13, for the corresponding period of 2010.

-- Cash, cash equivalents and short-term investments were $305.9 million as
of September 30, 2011.

"Sustained profitability remains as one of the principal goals for the Company," said UTStarcom President and Chief Executive Officer Jack Lu. "Our cost restructuring efforts continue to show encouraging results as we recorded our second consecutive profitable quarter. In the third quarter of 2011, we announced the completion of our first end-to-end Internet TV solution for a cable TV network customer and launched five new products at the Beijing Telecommunications EXPO. Customers will look to us because of our ability to develop customized solutions that will enhance the subscriber experience. As we look to the quarters ahead, demand for our solutions and services is healthy and our focus will be on execution and expanding our revenue contribution from higher value-added solutions."

UTStarcom Vice President and Chief Financial Officer Jin Jiang added, "We reiterate our confidence in achieving our revenue, expense control and profitability guidance for 2011. We were able to improve our gross margin in the third quarter both year-over-year and sequentially, which contributed to bottom-line profitability this quarter. In regards to our new OSS business, we have experienced some delays as we are being very prudent in our due diligence and valuation process of potential acquisition targets and revenue sharing partners. We continue to believe our OSS business will play an integral role as we aspire to achieve sustainable long-term profitability."

Third Quarter 2011 Financial Results

Revenues

UTStarcom's total revenues for the third quarter of 2011 were $83.3 million, an increase of 35.7% year-over-year from $61.4 million for the corresponding period of 2010. Total revenues for the nine months ended September 30, 2011 were $237.1 million, an increase of 10.1% year-over-year from $215.4 million for the corresponding period of 2010.

Three months ended September 30, 2011 and 2010

-- Net sales from equipment for the third quarter of 2011 were $75.3
million, an increase of 44.6% year-over-year. The increase was mainly
driven by increased sales of PTN products in Japan, MSAN products in
India and Japan, RollingStream® infrastructure product sales in India
and Thailand, and GEPON and set-top boxes in China.

-- Net sales from equipment-based services for the third quarter of 2011
were $7.7 million, a decrease of 17.4% year-over-year. The decrease was
primarily driven by fewer iPAS maintenance contracts due to the
anticipated phase-out of PHS in China in 2011.

-- Net sales from operational support services ("OSS") for the third
quarter of 2011 were approximately $0.3 million as a result of an IP
signage revenue sharing project.

Nine months ended September 30, 2011 and 2010

-- Net sales from equipment for the nine months ended September 30, 2011
were $209.4 million, an increase of 13.9% year-over-year. The increase
was mainly driven by increased sales of PTN products in Japan, MSAN
products in India and Japan, RollingStream® infrastructure products in
India and Thailand, and GEPON and set-top boxes in China. The $7.4
million of equipment revenue recognized from the Jersey Telecom Limited
contract in the second quarter of 2011 also contributed to the
year-over-year increase. The year-over-year increase in equipment sales
were partially offset by the wind-down of the Company's handset business
and the decrease in sales of other major product lines.

-- Net sales from equipment-based services for the nine months ended
September 30, 2011 were $27.2 million, a decrease of 14.0%
year-over-year. The decrease was mainly due to fewer iPAS maintenance
contracts due to the anticipated phase-out of PHS in China on December
31 2011, but was partially offset by increased international service
contracts.

-- Net sales from OSS for the nine months ended September 30, 2011 were
$0.5 million as a result of an IP signage revenue sharing project.

Gross Profit

UTStarcom's gross profit was $31.9 million, or 38.4% of net sales, for the third quarter of 2011, compared to $12.1 million, or 19.7% of net sales, for the corresponding period of 2010. Gross profit was $85.8 million, or 36.2% of net sales, for the nine months ended September 30, 2011, compared to $62.2 million, or 28.9% of net sales, for the corresponding period of 2010.

Three months ended September 30, 2011 and 2010

-- Gross profit for equipment sales for the third quarter of 2011 was $29.9
million, an increase of 233.2% year-over-year. Gross margin for
equipment sales for the third quarter of 2011 was 39.7%, compared to
17.2% for the corresponding period in 2010. The margin increase was
primarily due to increased sales of PTN products with higher gross
margins in the third quarter of 2011. Gross margin for equipment sales
in China improved in the third quarter of 2011 compared to the
corresponding period of 2010. In addition, the Company received $1.9
million of one-time indemnification from its customer due to a purchase
order cancellation in October 2010.

-- Gross profit for equipment-based services for the third quarter of 2011
was $2.3 million, a decrease of 26.5% year-over-year. Gross margin for
equipment-based services for the third quarter of 2011 was 29.7%,
compared to 33.3% for the corresponding period of 2010. The margin
decrease was primarily due to fixed services costs remaining relatively
constant, despite fewer iPAS maintenance contracts due to the
anticipated phase-out of PHS in China in 2011.

-- Gross loss for OSS for the third quarter of 2011 was approximately $0.3
million as a result of the amortization of the costs of revenue-sharing
projects.

Nine months ended September 30, 2011 and 2010

-- Gross profit for equipment sales for the nine months ended September 30,
2011 was $78.6 million, an increase of 54.1% year-over-year. Gross
margin for equipment sales for the nine months ended September 30, 2011
was 37.5%, compared to 27.7% for the corresponding period of 2010. The
margin increase was primarily due to higher equipment gross margin
generated from $7.4 million equipment revenue recognized from the Jersey
Telecom Limited contract in the second quarter of 2011 and from
increased sales of higher margin PTN products.

-- Gross profit for equipment-based services for the nine months ended
September 30, 2011 was $8.8 million, a decrease of 21.4% year-over-year.
Gross margin for equipment-based services for the nine months ended
September 30, 2011 was 32.4%, compared to 35.5% for the corresponding
period of 2010. The margin decrease was primarily due to a lower renewal
rate of iPAS service contracts driven by the anticipated phase-out of
PHS in China in 2011, while fixed services costs remained relatively
constant.

-- Gross loss for OSS for the nine months ended September 30, 2011 was $1.6
million as a result of the amortization of the costs of revenue-sharing
projects.

Operating Expenses

Operating expenses for the third quarter of 2011 were $17.8 million, a decrease of 49.8% year-over-year, from $35.4 million for the corresponding period in 2010. Operating expenses for the nine months ended September 30, 2011 were $73.0 million, a decrease of 33.2% year-over-year, from $109.3 million for the corresponding period of 2010.

Three months ended September 30, 2011 and 2010

-- Selling, general and administrative ("SG&A") expenses for the third
quarter of 2011 were $14.8 million, a decrease of 39.7% year-over-year.
The decrease was primarily due to a decrease in rental costs after
relocating the Company's Hangzhou office to a new site, a decrease in
personnel costs as a result of restructuring efforts, travel expense
cost control, a decrease in the use of third-party services, and
recoveries of bad debts.

-- Research and development ("R&D") expenses for the third quarter of 2011
were $7.3 million, a decrease of 26.2% year-over-year. The decrease was
primarily due to a decrease in personnel costs as a result of the
Company's restructuring efforts, travel expense cost control, and a
decrease in rental and facilities related costs as a result of moving
the Company's Hangzhou office to a new site in the third quarter of
2011.

-- Amortization of intangible assets for the third quarter of 2011 was
approximately $0.3 million as a result of the amortization of intangible
assets acquired in the iTV Media investment, formerly Stage Smart. There
was no amortization of intangible assets for the corresponding period of
2010.

-- Net gains on restructuring for the third quarter of 2011 were $0.5
million, compared to costs of $2.3 million for the corresponding period
of 2010. The decrease was primarily the result of the latest
restructuring plan in 2009 nearing completion in 2011. UTStarcom does
not expect to incur additional significant restructuring charges for the
remainder of 2011 related to the previous restructuring plans.

-- Net gain on divestitures for the third quarter of 2011 was $4.2 million
as a result of contingent gain realized upon entering into a three-party
assignment agreement to transfer and release all of the remaining
obligations in connection with the sale of China PDSN assets in the
third quarter of 2010. This is compared to $1.4 million of gain on
divestitures in the third quarter 2010 related to our non-core IP
Messaging and US PDSN assets sold in the second quarter of 2010, EMEA
operations and China PDSN assets sold in the third quarter of 2010.

Nine months ended September 30, 2011 and 2010

-- SG&A expenses for the nine months ended September 30, 2011 were $52.5
million, a decrease of 30.8% year-over-year. The decrease was primarily
due to a decrease in personnel costs as a result of restructuring
efforts, cost controls to reduce travel expenses and software license
expenses, and a reduction in the use of third-party services. The lower
year-over-year SG&A expenses were also the result of recoveries from bad
debt and lower fixed assets depreciation as a result of the sale of
Hangzhou office building. The decrease in SG&A expenses was partially
offset by increased rental and facilities related expenses due to the
dual rental expense payment of the Company's old and new Hangzhou office
facilities in the second quarter of 2011.

-- R&D expenses for the nine months ended September 30, 2011 were $21.6
million, a decrease of 25.6% year-over-year. The decrease was primarily
due to a decrease in personnel costs as a result of restructuring
efforts, cost controls to reduce travel expenses, third party services
expenses and software license expenses, and a reduction in fixed assets
depreciation as a result of the sale of the Company's former Hangzhou
office building.

-- Amortization of intangible assets for the nine months ended September
30, 2011 was approximately $0.9 million as a result of the amortization
of intangible assets acquired in the iTV Media investment, formerly
Stage Smart. There was no amortization of intangible assets in the
corresponding period in 2010.

-- Restructuring costs for the nine months ended September 30, 2011 were
$2.2 million, a decrease of 77.4% year-over-year. The decrease was
primarily the result of the latest restructuring plan in 2009 nearing
completion in 2011. UTStarcom does not expect to incur significant
additional restructuring charges for the remainder of 2011 related to
the previous restructuring plans.

-- Net gain on divestitures for the nine months ended September 30, 2011
was $4.2 million as a result of the contingent gain realized upon
entering into a three-party assignment agreement to transfer and release
all of the remaining obligations in the third quarter of 2011 in
connection with the sale of China PDSN assets in 2010. This is compared
to $5.2 million of gain related to the sale of non-core IP Messaging and
U.S. PDSN assets, EMEA operations, China PDSN assets and the RAS product
line recognized in the corresponding period in 2010.

Operating Income

Operating income for the third quarter of 2011 was $14.2 million, compared to an operating loss of $23.3 million for the corresponding period of 2010. Operating income for the nine months ended September 30, 2011 was $12.7 million, compared to an operating loss of $47.1 million for the corresponding period of 2010.

Other Income (Expense), Net

Three months ended September 30, 2011 and 2010

-- Net other expense for the third quarter of 2011 was $7.3 million
compared to net other income of $7.0 million for the corresponding
period of 2010. Net other expense for the third quarter of 2011
primarily consisted of a $7.2 million foreign exchange loss attributed
to the depreciation of INR against USD during the quarter, which was
partially offset by the foreign exchange gain driven by the appreciation
of JPY against USD during the same period. Net other income in the third
quarter of 2010 primarily consisted of $6.9 million in foreign exchange
gains as a result of the appreciation of INR and JPY against USD during
the quarter.

Nine months ended September 30, 2011 and 2010

-- Net other expense for the nine months ended September 30, 2011 was $3.2
million compared to net other income of $7.1 million for the
corresponding period in 2010. Net other expense for the nine months
ended September 30, 2011 primarily consisted of $3.5 million of foreign
exchange loss attributed to the depreciation of INR against USD in the
first nine months of 2011, which was partially offset by the foreign
exchange gain driven by the appreciation of JPY against USD during the
same period. Net other income for the nine months ended September 30,
2010 primarily consisted of $6.1 million in foreign exchange gains as a
result of the appreciation of INR and JPY against USD, the proceeds of
$0.5 million received from a dismissal of legal proceedings between MRV
Communications and its former shareholders, and financial subsidies of
$0.5 million received from the Chinese government.

Net Income (Loss)

Net income attributable to UTStarcom shareholders for the third quarter and the first nine months of 2011 was $8.0 million and $9.3 million, respectively. Net loss attributable to UTStarcom shareholders for the third quarter and the first nine months of 2010 was $17.2 million and $42.1 million, respectively. Basic earnings per share for the third quarter and the first nine months of 2011 amounted to $0.05 and $0.06, respectively. Basic loss per share for the third quarter and the first nine months of 2010 was $0.13 and $0.32, respectively.

Cash Flow

Net cash used in operating activities for the third quarter of 2011 was $12.1 million. During the three months ended September 30, 2011, the results of the Company's operating activities were significantly impacted by the following:

-- Net income of $7.6 million adjusted for non-cash gains of approximately
$2.4 million resulting in a net cash in-flow of $5.2 million. The
non-cash gains were primarily net gain on divestitures, recovery of
doubtful accounts, and net gain on disposal of assets, partially offset
by stock-based compensation cost, depreciation and amortization in the
third quarter of 2011.

-- Change in operating assets and liabilities of $17.3 million. The
increase in the Company's activities to streamline its operations in the
third quarter of 2011 was the primary driver of the changes in operating
assets and liabilities, aided by a decrease in deferred revenue,
customer advances and other liabilities, partially offset by the
decrease in inventory and deferred cost, accounts receivables and other
assets, and an increase in accounts payable.

-- Cash provided by investing activities for the third quarter of 2011 was
$1.2 million, primarily driven by a decrease in restricted cash and
proceeds from the sale of short-term investments, partially offset by
the purchase of property, plant and equipment and intangible assets, the
purchase of an investment interest and the purchase of short-term
investments.

-- Cash used in financing activities for the third quarter of 2011 was $1.5
million for repurchasing shares of common stock of the Company.

As of September 30, 2011, UTStarcom had cash and cash equivalents of $301.9 million and short-term investments totaling $4.0 million.

Business Outlook

The Company reiterates the following outlook for fiscal year 2011:

-- Total revenues to be in the range of $300.0 million to $320.0 million,
which includes PAS deferred revenue through the end of 2011 at the rate
of $23.0 million per quarter.

-- Annualized operating expenses to be less than $100.0 million.

-- Break even in 2011 on a full-year basis.

The previously announced goal of generating 10.0% of total sales in 2011 from the new OSS business was based on a level of progress in organic growth and acquisition activities. The Company has strategically undertaken a cautious and deliberate approach in identifying acquisition targets and revenue sharing partners to find the most suitable target at the right valuation. The Company's rigorous due diligence and valuation process has impacted the Company's ability to achieve this target for the full year 2011. The Company maintains its belief that the OSS business will play an important role for the Company's future growth and profitability.

This forecast reflects UTStarcom's current and preliminary view, which is subject to change.

Third Quarter 2011 Conference Call Details

UTStarcom's management will host an earnings conference call at 8:00 a.m. U.S. Eastern Time on Wednesday, November 9, 2011 (9:00 p.m. Beijing/Hong Kong Time on November 9, 2011).

The conference call dial-in numbers are as follows:

United States: + 1-800-860-2442
International: + 1-412-858-4600

The conference ID number is 10006461

A replay of the call will be available until 9:00 a.m. U.S. Eastern Time on November 17, 2011.

The conference call replay numbers are as follows:

United States: + 1-877-344-7529
International: + 1-412-317-0088

The conference ID number for accessing the recording is 10006461

Investors will also have the opportunity to listen to the live conference call and the replay over the Internet through the investor relations section of UTStarcom's web site at: http://www.utstar.com.

About UTStarcom Holdings Corp

UTStarcom is a leading provider of interactive, IP-based network solutions in iDTV, IPTV, Internet TV and Broadband for cable and telecom operators. The Company sells its solutions to operators in both telecommunications around the world and cable market in China. UTStarcom enables its customers to rapidly deploy revenue-generating access services using their existing infrastructure, while providing a migration path to cost-efficient, end-to-end IP networks.

Founded in 1991, listed on the NASDAQ in 2000, the Company has its operational headquarters in Beijing, China and research and development operations in China and India. For more information about UTStarcom, visit the Company's Web site at http://www.utstar.com.

Safe Harbor Statement

This release includes forward-looking statements, including statements regarding the effects of the Company's corporate structure, the move to new facilities in Hangzhou, expectations from the new operational support service ("OSS") business and expectations regarding the Company's performance in 2011. These statements are forward-looking in nature and subject to risks and uncertainties that may cause actual results to differ materially. These include risks and uncertainties regarding the ability of the Company to realize anticipated results of operational improvements, the Company's ability to deliver and capitalize on the opportunities of the new OSS business, revenues and expenses under its business model, and executing on its business plan and managing regulatory matters as well as risk factors identified in its latest Annual Report on Form 10-K, Form 10-K/A, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K or 6-K as filed with the Securities and Exchange Commission. The Company is in a period of transition and the conduct of its business is exposed to additional risks as a result. All forward-looking statements included in this release are based upon information available to the Company as of the date of this release, which may change, and the Company assumes no obligation to update any such forward-looking statements.

UTSTARCOM HOLDINGS CORP.
Unaudited Condensed Consolidated Balance Sheets

September December
30, 31,
2011 2010
---- ----
(In thousands, except
par value)
ASSETS
Current assets:
Cash and cash equivalents $301,889 $351,507
Short-term investments 4,045 546
Accounts receivable, net of
allowances for doubtful
accounts 21,517 30,051
of $36,361 and $32,176,
respectively
Inventories 42,067 48,404
Deferred costs 105,230 111,179
Prepaids and other current
assets 32,091 46,943
Short-term restricted cash 13,543 15,955
Total current assets 520,382 604,585
Property, plant and equipment,
net 10,916 4,819
Goodwill 13,820 13,820
Intangible assets, net 4,044 4,858
Long-term investments 19,231 11,273
Long-term deferred costs 64,249 132,587
Long-term deferred tax assets 1,416 1,742
Other long-term assets 7,284 10,599
Total assets $641,342 $784,283
======== ========

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable 24,301 36,356
Income taxes payable 528 -
Customer advances 84,739 82,607
Deferred revenue 93,613 182,963
Deferred tax liabilities 1,436 1,436
Other current liabilities 51,882 87,487
------ ------
Total current liabilities 256,499 390,849
Long-term deferred revenue 95,368 122,241
Other long-term liabilities 23,549 22,253
Total liabilities 375,416 535,343
------- -------

Equity:
UTStarcom Holdings Corp.
stockholders' equity:
Common stock: $0.00125 par
value; 750,000 authorized
shares; 155,394 and 182 182
155,327 shares issued and
outstanding at September 30,
2011 and
December 31, 2010,
respectively
Additional paid-in capital 1,306,322 1,303,627
Treasury Stock (1,517) -
Accumulated deficit (1,122,986) (1,132,303)
Accumulated other
comprehensive income 76,920 69,423
Total UTStarcom Holdings Corp.
stockholders' equity 258,921 240,929
------- -------
Noncontrolling interests 7,005 8,011
----- -----
Total equity 265,926 248,940
------- -------
Total liabilities and equity $641,342 $784,283
======== ========

UTSTARCOM HOLDINGS CORP.
Unaudited Condensed Consolidated Statements of Operations

Three months ended
September 30,
------------------
2011 2010
---- ----
(in thousands, except per share data)
Net sales
Products $75,259 $52,041
Services 8,038 9,353
----- -----
83,297 61,394
Cost of net sales
Products 45,352 43,065
Services 6,000 6,236
Gross profit 31,945 12,093
------ ------

Operating expenses:
Selling, general and
administrative 14,780 24,530
Research and development 7,327 9,922
Amortization of intangible
assets 310 -
Restructuring (509) 2,336
Net gain on divestitures (4,151) (1,436)
------ ------
Total net operating
expenses 17,757 35,352
------ ------

Operating income (loss) 14,188 (23,259)
------ -------

Interest income 436 594
Interest expense (67) (70)
Other income (expense), net (7,305) 6,967
------ -----

Income (loss) before income
taxes 7,252 (15,768)
Income tax benefit
(expense) 301 (1,400)
--- ------
Net income (loss) 7,553 (17,168)
Net income (loss)
attributable to
noncontolling interests 458 (4)
---
Net income (loss)
attributable to UTStarcom
Holdings Corp. $8,011 $(17,172)
====== ========

Basic earnings (loss) per
share $0.05 $(0.13)
===== ======

Basic weighted average
ordinary shares
outstanding 155,516 135,550
======= =======

Nine months ended
September 30,
-----------------
2011 2010
---- ----
(in thousands, except per share data)
Net sales
Products $209,434 $183,836
Services 27,676 31,570
------ ------
237,110 215,406
Cost of net sales
Products 130,861 132,854
Services 20,465 20,378
Gross profit 85,784 62,174
------ ------

Operating expenses:
Selling, general and
administrative 52,528 75,882
Research and development 21,591 29,023
Amortization of intangible
assets 929 -
Restructuring 2,175 9,627
Net gain on divestitures (4,185) (5,244)
------ ------
Total net operating
expenses 73,038 109,288
------ -------

Operating income (loss) 12,746 (47,114)
------ -------

Interest income 1,481 1,392
Interest expense (241) (208)
Other income (expense), net (3,214) 7,067
------ -----

Income (loss) before income
taxes 10,772 (38,863)
Income tax benefit
(expense) (2,461) (3,243)
------ ------
Net income (loss) 8,311 (42,106)
Net income (loss)
attributable to
noncontolling interests 1,006 6
Net income (loss)
attributable to UTStarcom
Holdings Corp. $9,317 $(42,100)
====== ========

Basic earnings (loss) per
share $0.06 $(0.32)
===== ======

Basic weighted average
ordinary shares
outstanding 155,106 131,781
======= =======

UTSTARCOM HOLDINGS CORP.
Unaudited Condensed Consolidated Statements of Cash Flows

Three months ended
September 30,
------------------
2011 2010
---- ----
(In thousands)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $7,553 $(17,168)
Adjustments to reconcile net
income (loss) to net
cash provided by (used in)
operating activities:
Depreciation and amortization 795 756
Amortization of deferred gain on
sale-leaseback - (322)
Provision (reversal) for doubtful
accounts (270) 1,851
Net gain on disposal of assets (229) -

Stock-based compensation expense 1,285 1,584
Net gain on divestitures (4,151) (1,436)
Gain on settlement of an
investment interest - -
Deferred taxes 220 145
Other - 324
Changes in operating assets and
liabilities:
Accounts receivable 4,147 1,243
Inventories and deferred costs 28,998 22,935
Other assets 1,541 12,786
Accounts payable 1,208 (7,104)
Income taxes payable (1,151) (15)
Customer advances (12,706) (63,179)
Deferred revenue (33,058) 49,089
Other liabilities (6,280) (13,930)
Net cash used in operating
activities (12,098) (12,441)
------- -------

CASH FLOWS FROM INVESTING
ACTIVITIES:
Additions to property, plant and
equipment (3,627) (790)
Net proceeds from divestitures - 1,348
Deposit received on sale of
building (net of tax payments) - -
Purchase of intangible assets (109) -
Change in restricted cash 5,863 4,381
Proceeds from settlement of an
investment interest - -
Purchase of an investment
interest (150) -
Contribution of equity investment
through a shareholder loan - -
Purchase of short-term
investments (1,578) (2,750)
Proceeds from sale of short-term
investments 445 2,410
Other 325 (639)
Net cash provided by (used in)
investing activities 1,169 3,960
----- -----

CASH FLOWS FROM FINANCING
ACTIVITIES:
Issuance of common stock and
option per stock purchase - 34,587
agreement , net of expense
Issuance of common stock upon
exercise of options - 7
Repurchase of common stock (1,500) (28)
Net cash provided by (used in)
financing activities (1,500) 34,566
------ ------
Effect of exchange rate changes
on cash and cash equivalents 761 4,100
--- -----
Net increase (decrease) in cash
and cash equivalents (11,668) 30,185
Cash and cash equivalents at
beginning of period 313,557 306,841
Cash and cash equivalents at end
of period $301,889 $337,026
======== ========

Nine months ended
September 30,
-----------------
2011 2010
---- ----
(In thousands)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $8,311 $(42,106)
Adjustments to reconcile net income
(loss) to net
cash provided by (used in)
operating activities:
Depreciation and amortization 2,228 4,166
Amortization of deferred gain on
sale-leaseback (625) (429)
Provision (reversal) for doubtful
accounts 3,479 6,012
Net gain on disposal of assets (396) -
Stock-based compensation expense 2,571 6,131
Net gain on divestitures (4,185) (5,244)
Gain on settlement of an investment
interest - (481)
Deferred taxes 439 (567)
Other - 366
Changes in operating assets and
liabilities:
Accounts receivable 5,362 (8,685)
Inventories and deferred costs 67,619 67,046
Other assets 10,694 3,318
Accounts payable (7,256) (32,445)
Income taxes payable 3,106 192
Customer advances 3,319 (35,866)
Deferred revenue (99,224) (4,400)
Other liabilities (34,911) (54,413)
Net cash used in operating
activities (39,469) (97,405)
------- -------

CASH FLOWS FROM INVESTING
ACTIVITIES:
Additions to property, plant and
equipment (9,708) (2,616)
Net proceeds from divestitures 34 2,848
Deposit received on sale of
building (net of tax payments) - 123,955
Purchase of intangible assets (109) -
Change in restricted cash 4,243 7,379
Proceeds from settlement of an
investment interest - 481
Purchase of an investment interest (761) (550)
Contribution of equity investment
through a shareholder loan (7,119) -

Purchase of short-term investments (7,291) (12,002)
Proceeds from sale of short-term
investments 6,310 7,825
Other 695 332
Net cash provided by (used in)
investing activities (13,706) 127,652
------- -------

CASH FLOWS FROM FINANCING
ACTIVITIES:
Issuance of common stock and option
per stock purchase - 34,587
agreement , net of expense
Issuance of common stock upon
exercise of options 124 7
Repurchase of common stock (1,500) (58)
Net cash provided by (used in)
financing activities (1,376) 34,536
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Effect of exchange rate changes on
cash and cash equivalents 4,933 6,400
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Net increase (decrease) in cash and
cash equivalents (49,618) 71,183
Cash and cash equivalents at
beginning of period 351,507 265,843
Cash and cash equivalents at end of
period $301,889 $337,026
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SOURCE UTStarcom, Inc.

UTStarcom, Inc.

CONTACT: Jing Ou-Yang, UTStarcom Holdings Corp., +86-10-8520-5153, jouyang@utstar.com; Agustin Bautista, Ogilvy Financial, Beijing, +86-10-8520-6166, utsi@ogilvy.com; In the U.S.: Jessica Barist Cohen, Ogilvy Financial, New York, +1-646-460-9989, utsi@ogilvy.com

Web Site: http://www.utstar.com

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