Friday, September 15, 2006

Calls of Note Part 3

- RBC Capital notes UTStarcom's (NASDAQ:UTSI) shares have risen sharply in recent weeks amidst mixed fundamentals and they are maintaining Sector Perform rating and price target of $8. Firm believes most of the stock activity may be related to short covering. Short interest is now ~23% of the float.

Fundamentally, they estimate the quarter may be tracking between the low to mid range of the guidance of $590-$625M recognizing that the business remains very lumpy. RBC remains at consensus or $595M. And while up sequentially ~8% from the prior quarter, the core
businesses are still declining YoY.

The PAS market continues to decline and the firm is estimating a decrease of almost 30% sequentially in what is a seasonally weaker quarter for this segment. Revenues in the PCD (50%) segment may see some incremental growth and thus far the reception on UTStarcom's CDM 7000, CDM 7025 as well as the Sidekick 3 and the XV 6700 and the PPC 6700 PDAs remain favorable.

Longer-term, PAS revenues may decline by about 15% over the next several years. This decline may be offset by growth in broadband (9%) driven by IPTV and wireless (21%) driven by emerging market CDMA expansions. PCD (50%) is likely to display modest growth looking ahead and is likely to remain a large portion of overall revenues.

Notablecalls: I must say the note started out much stronger than it ended. Still, I'd keep UTSI on the radar today and on Monday as the stock may be continue rolling over.

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