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Once again, the stars were misaligned for UTStarcom, as the telecommunications equipment vendor warned that third quarter profit and revenue will fall short of earlier guidance. In addition, the company said it is evaluating its long-term assets for possible impairment, and acknowledged a formal inquiry by the Securities and Exchange Commission into its financial disclosures during prior periods. The warning - which is not unusual to UTSI investors - comes as the company contends with significant restructuring efforts and problems with its accounting.


UTStarcom shares plunged in early trading, falling nearly 28% to a new 52-week low of $5.51. Year-to-date, the stock is down more than 75% - expounding investors' growing skepticism in the company's growth prospects. With numerous obstacles facing UTSI in the near-term, including a major restructuring, growing competition in the wireless market, a possible asset impairment, and now a SEC investigation, the risks are mounting. Moreover, choppy revenues and a negative margin impact in the current quarter, due to product delays and additional warranty reserves, instills added concern. As such, the current investment opportunity is not justified, given the lack of visibility after failing to deliver on quarterly results, again.
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