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Earnings came out Thursday:

new developments:

1. They have filed their 10k for 2004 and restated the taxes for 2003 as previously noted. They did have a material weakness statement for lack of internal controls but I am not too worried about this issue currently as I think they are improving.

2. As noted last time I had concerns about Q2 because the only thing good that has happened here recently was that JT contract which was mostly recognized in Q1. Well my concerns were justified as they came clean that indeed Q2 was going to suck and perhaps the rest of the year as well. They announced a restructuring that will elliminate 17% of their workforce and intends to save about $40M a quarter in operating expenses. There will be a one time charge of about $25M in Q2 for this as well as another tax adjustment charge of $40M and an operating loss of about $60M - guidance for Q2 isn't pretty but at least they stopped there(no annual guidance). Meanwhile they did announce another major JT contract that will likely help the second half of the year.

Now my notes in the same format I've used in previous posts:

1. margins: In Q1 the core gross margin was 38.3% and ACC was 4.3% which blended to 26.4%. This was aided by 50% margins in BB because of the JT contract. PAS handset was down to 11.5%(remember when this mattered - LOL). WI gross margin was about 34%.

2. revenues: In Q4 they again achieved one of their goals of more than 50% ROW revenue(it was 75%). This was because of the ACC acquisition(35%) and the fall off in PAS. Overall handset(HS) revenue was 49%, broadband(BB) was 38% and wireless infrastructure(WI) was 13%. Guidance for Q2 is $740M with $500M coming from HS.

3. EPS: no longer relevant.

4. Balance Sheet & Cashflows: As part of their restructuring they plan to reduce working cap requirements. They also plan on being cashflow positive in Q2. Improvements here will be important to watch especially as the stock is now trading well below tangible book. If you want to be long(or short) UTSI an understanding of their BS(that stands for Balance Sheet also) is paramount.

-Jim(aka foolshdog)
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