At long last, it would seem that UTStarcom shareholders
The telecommunications company announced Monday two separate orders from China Telecom
In response to the news, investors bid up UTStarcom shares as much as 16%. Now, I really don't mean to play Dr. Doom and rain on a nice day for UTStarcom investors, but I'm wondering what exactly has everyone so fired up.
First of all, the announcements didn't specify the terms of the deals. So unless I missed something, we don't know whether this $185 million will all come in a single year or be spread out over time. Just assuming that it does all bear fruit in a year, that still only represents a bit more than 5% of the company's expected revenue -- nice, yes, but nothing to do cartwheels over.
Secondly, we've been hearing for some time now about how competitive pressures are hurting margins for the PAS business in China. Well, the equipment in question here is all PAS equipment, so what are the margins on this business going to look like?
Finally, everyone (including company management) has emphasized the need for UTStarcom to expand beyond its China PAS business. This agreement is part of the Chinese PAS business, so it's not exactly a rousing step toward that greater business diversity we've all been looking for from the company.
Honestly, I'm really not looking to throw UTStarcom under the bus again. It's just that I've followed this company for a while and seen this management team get investors fired up only to disappoint them again and offer little more than feeble excuses for the shortcomings.
So, I'll leave this story as I have in the past. If you believe that this management team can get the business under control and continue to drive growth, then the present price is a bargain. But if you look at recent quarters and feel uncomfortable as to whether management is up to the job, take a seat and at least wait to see the next earnings report before diving in with your own money.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned.