UTStarcom in China

In the event of MII's granting of cellular licenses, UTStarcom's two biggest customers - China Telecom and China Netcom would shift to third generation cellular networks. These factors forced UTStarcom to reconsider its single market, single product strategy. UTStarcom decided to diversify the geographies it served. The company decided to pursue a strategy aimed at selling its established products to new customers in developing countries like Brazil, Mexico, Vietnam, Thailand and India. UTStarcom considered India an important market and started with a liaison office at Gurgaon in May 2001 and later converted it into a full fledged branch office. The company targeted Indian telecom operators both in the public and private sector...

On July 27, 2004, UTStarcom reported second quarter gross profit margins of 25.4%, lower than the forecasted gross profit margins of 27%-28%. The fall in margins was attributed to supply chain problems outside China. The company's share prices dropped from $25 to $18. In August 2004, UTStarcom ran into accounting problems when it was discovered that an equipment sale worth $1.96 million did not qualify as a sale for the second quarter of fiscal 2005 but was wrongly recognized as revenues. On account of this, the company had to delay its SEC filings by five days. This event led to a further share price drop of 14% to $15.45...