Well, here we are in early '06, and telecom equipment maker UTStarcom (NASDAQ:UTSI) is still a mess. Instead of the once-grand management predictions of $4 billion in revenue and $2 in earnings for 2005, we have the reality of about $3 billion in revenue and a loss of nearly $4 per share. But hey, what's a couple hundred million of evaporated market cap between friends, right?

In another example of providing just what shareholders don't need, management reminded us all of part of the reason it got into this mess. We didn't see full and detailed fourth-quarter results because the company now has to go back and review whether the company improperly recognized revenue from an old Indian contract. Just lovely, no?

Well, here's what we do know about the quarter. Revenue in the fourth quarter fell about 8% from last year, although it did come in higher than expected. Gross margin came in at 12.1%, which is below last year's 15% and at the low end of the management's guidance. Net loss for the quarter was about $21 million ($0.17 per share), better than the year-ago result and much better than the average analyst expectation.

I'm not going to bother much with what details the company did provide about the quarter. China still accounted for 30% of total sales, and businesses like Sprint (NYSE:S) and Verizon (NYSE:VZ) remain customers.

The major question now is what the heck to do with the stock. Management put forth pretty uninspiring guidance for the next quarter (nearly 20% lower than current estimates on revenue), but it does believe the company will be profitable in late '06 or early '07. What's more, UTStarcom did manage to produce positive free cash flow for both the quarter and the year. I suspect most of that will be from improved working capital, though, and that structural free cash flow will still be quite negative.

Here's the deal -- this is not Motorola (NYSE:MOT), Nokia (NYSE:NOK), or even Lucent (NYSE:LU). This is a company with legitimate future growth prospects (like IPTV in China) but a very questionable management team. In fact, the best thing I could see happening here is a large dissident shareholder movement that ultimately prompted the board to boot the current CEO and replace him. (Given the high insider ownership, I'm not optimistic about that.)

Valuation is enticingly low, and simply a mediocre performance from management should be enough to make this company profitable. Given that I'm not sure that management is capable of a performance good enough to call "mediocre," this is still a stock with a whole lot of risk involved. I'm very, very tempted to take a small position with an "it probably can't get much worse" thesis, but that's a very dangerous approach. Only investors with a very high tolerance for risk should even consider this one today.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).