UTStarcom Holdings Corporation (UTSI)
Q4 2012 Earnings Call
March 18, 2013 8:00 AM ET
Executives
Jing Ou Yang – Director, IR
William Wong – CEO
Robert Pu – CFO
Presentation
Operator
Ladies and gentlemen, thank you for standing by for UTStarcom’s Fourth Quarter and Full Year 2012 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. If you have any objections, you may disconnect at this time.
It is now my pleasure to introduce your host, Ms. Jing Ou Yang, Investor Relations Director for UTStarcom. You may begin.
Jing Ou Yang
Hello everyone and welcome to UTStarcom’s fourth quarter and full year 2012 earnings conference call. Earlier today, we distributed our earnings press release and you can find a copy on our website at www.utstar.com. In addition, we have posted a slide show presentation on our website, which you can download and use to follow along with today’s call. On today’s call, we have Mr. William Wong, our CEO; and Mr. Robert Pu, our CFO.
Before we get started, I will read the Company’s advisory on forward-looking statements. This call will include forward-looking statements relating to the company’s media operational support service business, new strategy of the company’s business and the company’s performance in year 2013. These statements are forward-looking in nature and subject to risks and uncertainties that may cause actual results to differ materially.
This includes risk and uncertainties related to operating figures in financial condition and cash consumption of the company, figures in the composition of the company’s management and their effect on the company. The Company’s ability to realize anticipated result of operational improvements, and the benefit of the divestiture transactions, successfully operate its new Service business, execute on its business plan and manage regulatory matters, as well as risk factors identified in the company’s latest Annual Report on Form 20-F, and current reports on Form 6-K as filed with the Securities and Exchange Commission. The company is inaccurate of the transitions and the conduct of its business which fall to additional risks as a result. All forward-looking statements included in the press release are based upon the information relevant to the company as of the date of this release which may change and UTStarcom assumes no obligation to update any such forward-looking statements.
I will now turn the call over to our CEO, Mr. William Wong.
William Wong
Thank you, Jing and hello to everyone. As Jing mentioned, you can follow along with today’s call by downloading the presentation from our website at www.utstar.com. Also, unless otherwise stated, all figures mentioned during the call are in US dollars. ]
Let me begin from slide 5, by saying that 2012 was a momentous year for UTStarcom. We took forward a strategic action to transform the company by strengthening the management team, Board of Directors and business model and accelerating a transition to higher growth, more profitable business lines.
In short, we took many steps to better position the company and carry forward for the benefit of employees and customers and allow us to deliver greater value to shareholders over the long term.
To begin with, as you will remember, during the third quarter we kick started a new way forward by exiting the non-strategic and underperforming IPTV deployment business. In conjunction with this important milestone, we identified a set of priorities that will drive our way forward.
The priorities on page 6 of the presentation includes advance our efforts to transition into higher growth, more profitable areas and enhance the value of the business. To redeploy working capital to support higher return opportunities, particularly in the value-added services area and generate a more predictable, subscriber-based recurring revenue stream.
Having identified this as UTStarcom’s strategic growth priorities, we then developed a very specific new strategy designed to fully transform the company into a higher growth, more profitable business focused on providing next generation media operational support services and higher value-added broadband equipment offerings.
Move to slide 7. First we are deploying a TV over IP Services Platform with the aim of turning UTStarcom into a leading provider of high-in-demand digital content, such as local content, premium licensed studio content, internet content and other value-added services over a variety of platforms to mainstream subscribers.
We are building these platforms through a combination of internal development and strategic acquisitions. Our investments in iTV Media and aioTV are fine examples of this strategy. I will provide an update on this in a few moments.
Finally, we have implemented an operating structure that maximizes the potential of business units and foster innovation, collaboration and efficiency. We have structured our business in a way that aggregated license of the potential of business units by providing them with the flexibility, to pursue opportunities while also aligning their interest with broader corporate goals and those of shareholders.
We expect the new strategic plan will result in stronger and more predictable financial results through what will largely to be a subscription-based revenue model. We anticipate revenue from the new TV over IP services become the majority revenue contributor for UTStarcom by 2015 with gross margins in that part of the business exceeding 50%.
Let us move to slide 9 that I will give you a quick update on what has transpired since we announced all these changes. First, it is clear that the IPTV divesture was a turning point for the company, the effects of which we will continue to see for the next several quarters and years. With the IPTV divesture we have made good progress in stabilizing our operating expenses and setting a standard for maintaining strict cost control going forward.
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