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UTStarcom Releases Financial Results for the Third Quarter of 2008

ALAMEDA, Calif., Nov. 6 /PRNewswire-FirstCall/ -- UTStarcom, Inc.
(Nasdaq: UTSI) today reported financial results for the third quarter ended
September 30, 2008.

UTStarcom Releases Financial Results for the Third Quarter of 2008
UTStarcom Releases Financial Results for the Third Quarter of 2008

Third Quarter 2008 Total Revenues of $181 Million

(Logo: https://www.newscom.com/cgi-bin/prnh/20051013/SFTH063LOGO)

On July 1, 2008 the company divested its Personal Communications Division
('PCD') which has historically represented a significant portion of the
company's revenues. To enable a comparison of the financial results for the
company on a year-over-year basis that reflects the PCD divestiture, the
company has prepared certain pro forma non-GAAP results. The reconciliation
between GAAP and these pro forma non-GAAP financial measures is provided at
the end of this press release.

Net sales for the third quarter of 2008 were $181 million as compared to
$646 million in the third quarter of 2007. Gross margins for the third
quarter of 2008 and 2007 were 32.0% and 10%, respectively. The third quarter
2007 pro forma non-GAAP revenue and gross margins after adjusting for the PCD
divestiture were $248 million and 16%, respectively. The decrease in revenues
reflects the expected decline in our PAS business. The third quarter 2008
gross margins were positively impacted by our high margin NGN product and
certain one time adjustments.

The operating loss for the third quarter of 2008 and 2007 was
$34.9 million and $51.5 million, respectively. The third quarter 2007 pro
forma non-GAAP operating loss after adjusting for the PCD divestiture was
$68.8 million. The improvement in the operating loss for the third quarter of
2008 was primarily due to a reduction in year over year operating expenses.

During the third quarter 2008 the company incurred other expenses of
$14.9 million consisting primarily of an unrealized loss of $10.6 million from
currency devaluation and $4.3 million in write downs on long-term investments.

The net loss for the third quarter of 2008 was $55.9 million, or ($0.45)
per share, as compared to a net loss of $55.3 million, or ($0.46) per share in
the third quarter of 2007.

Net cash and cash equivalents as of September 30, 2008 was $331 million
compared to $180 million on December 31, 2007. The increase reflects proceeds
from the sale of PCD and certain short term investments partially offset by
operating usage of cash.

'During the third quarter we continued to execute on our strategy of
divesting our non-core businesses. As a result, we have reduced our operating
expenses and greatly improved our balance sheet,' said
Peter Blackmore,
UTStarcom's chief executive officer and president. 'Meanwhile our lead
IP-based infrastructure products continued to support telecom networks in our
key geographic markets.'

Q4 2008 Guidance

The Company will provide fourth quarter financial guidance during the
conference call.

Conference Call

The company will host a conference call to discuss the results. The call
will take place at 2:00 p.m. (PST) / 5:00 p.m. (EST) on November 6, 2008. The
conference call dial-in numbers are: United States and Canada 888-889-1058;
International 706-634-2327. The conference ID number is 71195495.

A replay of the call will be available for 30 days. The conference call
replay numbers are as follows: United States -- 800-642-1687; International --
706-645-9291. The conference ID number is 71195495.

Investors will also have the opportunity to listen to the conference call
and the replay over the Internet through the investor relations section of
UTStarcom's Web site at: https://www.utstar.com.

To listen to the live call, please go to the Web site at least 15 minutes
early to register, and to download and install any necessary audio software.
For those who cannot listen to the live broadcast, a replay will also be
available on this site.

Discussion of Pro Forma Non-GAAP Financial Measures

UTStarcom has supplemented its condensed consolidated financial statements
presented on a GAAP basis with pro forma non-GAAP revenues, gross profits,
operating expenses and operating profit (loss) measures in order to present
the company's results as if PCD had been divested prior to each time period
reflected below.

We believe use of these pro forma non-GAAP measures is appropriate to
enable relevant year over year comparisons to our current financial results
and is intended to provide both management and investors with a more complete
understanding of UTStarcom's underlying results and trends. In addition,
these pro forma non-GAAP measures are among the information management uses as
a basis for our planning and forecasting of future periods. The presentation
of this additional information is not meant to be considered in isolation or
as a substitute for results prepared in accordance with generally accepted
accounting principles in the United States.

About UTStarcom, Inc.

UTStarcom is a global leader in IP-based, end-to-end networking solutions
and international service and support. The company sells its solutions to
operators in both emerging and established telecommunications markets around
the world. UTStarcom enables its customers to rapidly deploy
revenue-generating access services using their existing infrastructure, while
providing a migration path to cost-efficient, end-to-end IP networks. Founded
in 1991 and headquartered in Alameda, California, the company has research and
development operations in the United States, China, Korea and India. For more
information about UTStarcom, visit the company's Web site at
https://www.utstar.com.

Forward-Looking Statements

This release includes forward-looking statements, including the foregoing
statements regarding the company's strategy of divesting its non-core
businesses, and expectations with respect to anticipated future results.
These statements are forward-looking in nature and subject to risks and
uncertainties that may cause actual results to differ materially. These risks
include the ability of the company to realize anticipated results of
operational improvements and execute on its liquidity plans as well as risk
factors identified in its latest Annual Report on Form 10-K, Quarterly Reports
on Form 10-Q and Current Reports on Form 8-K, as filed with the Securities and
Exchange Commission.



                                 UTStarcom, Inc.
                      Condensed Consolidated Balance Sheets
                                 (in thousands)
                                   (Unaudited)

                                               September 30,      December 31,
                                                   2008              2007
                   ASSETS
    Current assets:
      Cash, cash equivalents and short-term
       investments                                $330,562          $503,078
      Accounts and notes receivable, net           166,831           343,525
      Inventories and deferred costs               337,714           524,727
      Prepaids and other current assets            149,181           121,636
      Total current assets                         984,288         1,492,966
    Long-term assets:
      Property, plant and equipment, net           203,411           209,094
      Long-term deferred costs                     156,789           164,766
      Other long-term assets                        96,651           117,762
        Total assets                            $1,441,139        $1,984,588

       LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Accounts payable                            $135,995          $148,440
      Short-term debt                                    -           322,829
      Customer advances                            179,065           229,050
      Deferred revenue                             118,264           100,502
      Other current liabilities                    230,338           302,395
        Total current liabilities                  663,662         1,103,216
    Long-term liabilities:
      Long-term debt                                     -               333
      Long-term deferred revenue and other
       liabilities                                 237,678           259,358
        Total liabilities                          901,340         1,362,907

    Minority interest in consolidated
     subsidiaries                                      789             3,705
    Total stockholders' equity                     539,010           617,976
      Total liabilities, minority interest
       and stockholders' equity                 $1,441,139        $1,984,588



                                 UTStarcom, Inc.
                 Condensed Consolidated Statements of Operations
                     (in thousands, except per share amounts)
                                   (Unaudited)

                                   Three months ended    Nine months ended
                                     September 30,         September 30,
                                     2008      2007       2008        2007

    Net sales                      $180,607  $646,494  $1,399,352  $1,660,640
    Cost of net sales               123,280   582,061   1,167,998   1,441,193
    Gross profit                     57,327    64,433     231,354     219,447

    Operating expenses (income):
      Selling, general and
       administrative                59,445    74,297     211,199     242,999
      Research and development       35,971    41,881     116,657     127,700
      Amortization of intangible
       assets                           279     4,046       3,833      12,137
      Net gain on divestitures       (3,455)   (4,271)     (3,455)     (4,271)
    Total operating expenses         92,240   115,953     328,234     378,565

    Operating loss                  (34,913)  (51,520)    (96,880)   (159,118)

    Interest income (expense), net    1,697    (5,859)     (3,724)    (11,601)
    Other income (expense), net     (14,943)    4,347      38,107       8,476
    Loss before income taxes and
     minority interest              (48,159)  (53,032)    (62,497)   (162,243)
    Income tax expense               (7,791)   (3,095)     (7,396)    (10,735)
    Minority interest in losses of
     consolidated subsidiaries            6       799         526       1,961
    Net loss                       $(55,944) $(55,328)   $(69,367)  $(171,017)


    Loss per share - Basic and
     diluted                         $(0.45)   $(0.46)     $(0.56)     $(1.41)

    Weighted average shares used
     in per share calculation:
      - Basic and diluted           123,884   121,011     123,036     120,965



                                 UTStarcom, Inc.
                 Condensed Consolidated Statements of Cash Flows
                                  (in thousands)
                                   (Unaudited)

                                        Nine months ended   Nine months ended
                                        September 30, 2008  September 30, 2007


    Net cash used in operating activities      $(31,872)           $(193,355)

    Cash flows from investing activities:
      Property, plant and equipment, net        (12,671)             (22,530)
      Investments, net                           (3,841)               3,334
      Proceeds from repayment of loan by a
       variable interest entity                   7,728                  -
      Net proceeds from divestitures            207,097                4,271
      Change in restricted cash                 (10,380)               7,273
      Short-term investments, net                57,506               (8,962)
      Other                                         245                 (115)
    Net cash provided by (used in)
     investing activities                       245,684              (16,729)
    Cash flows from financing activities:
      Borrowings, net                          (325,317)              33,045
      Other                                      (7,907)               6,028
    Net cash (used in) provided by
     financing activities                      (333,224)              39,073
    Effect of exchange rate changes on
     cash and cash equivalents                   10,932               18,938
    Net decrease in cash and cash
     equivalents                               (108,480)            (152,073)
    Cash and cash equivalents at
     beginning of period                        437,449              661,623
    Cash and cash equivalents at end of
     period                                    $328,969             $509,550



                               UTSTARCOM, INC.
         RECONCILIATION OF GAAP REVENUE TO PRO FORMA NON-GAAP REVENUE
                               ($ in millions)
                                 (Unaudited)

To supplement our condensed consolidated financial statements presented on
a GAAP basis, UTStarcom uses certain pro forma non-GAAP measures which are
adjusted to present those metrics as if PCD had been divested prior to each
time period reflected below. We believe this enables year over year
comparisons to our current financial results. These adjustments to our GAAP
results are made with the intent of providing both management and investors a
more complete understanding of UTStarcom's underlying results and trends. In
addition, these adjusted pro forma non-GAAP results are among the information
management uses as a basis for our planning and forecasting of future periods.
The presentation of this additional information is not meant to be considered
in isolation or as a substitute for results prepared in accordance with
generally accepted accounting principles in the United States.

    Q3 Earnings Release Conference Call - November 6, 2008
    Reconciliation of 2007, Q1 2008 and Q2 2008 pro forma non-GAAP Information
    $ in millions

                                                                Consolidated
              Consolidated Consolidated Consolidated Consolidated Revenue
                Revenue      Revenue      Revenue      Revenue      as
                   as           as           as           as      Reported
                Reported     Reported     Reported     Reported      in
                   in           in           in           in        Full
                Q1 2007      Q2 2007      Q3 2007      Q4 2007   Year 2007
                Form 10Q     Form 10Q     Form 10Q     Form 10Q   Form 10K
    GAAP Revenue   $476         $538       $646         $806      $2,466

    Less: PCD
     Segment(a)     288          358        458          560       1,664

    Add: Handset
     Sales to PCD(b) 77           70         60           53         260

    Total Non
     GAAP Revenue  $265         $250       $248         $299      $1,062



                                     Consolidated  Consolidated
                                        Revenue       Revenue     Consolidated
                                      as Reported   as Reported      Revenue
                                          in            in         as Reported
                                       Q1 2008        Q2 2008          in
                                       Form 10Q       Form 10Q      Q3 2008
    GAAP Revenue                         $586          $633          $181

    Less: PCD Segment (a)                 431           449             0

    Add: Handset Sales to PCD (b)          35            56             0

    Total Non-GAAP Revenue               $190          $240          $181

    (a) Effective July 1, 2008 the PCD segment was divested by the Company

    (b) The pro forma adjustment reflects estimated revenue from products sold
    to PCD, as if PCD was a third party entity. For consolidated reporting
    purposes these sales were considered intercompany sales and eliminated in
    consolidation.



                               UTSTARCOM, INC.
    RECONCILIATION OF GAAP GROSS MARGIN TO PRO FORMA NON-GAAP GROSS MARGIN
                               ($ in millions)
                                 (Unaudited)

To supplement our condensed consolidated financial statements presented on
a GAAP basis, UTStarcom uses certain pro forma non-GAAP measures which are
adjusted to present those metrics as if PCD had been divested prior to each
time period reflected below. We believe this enables year over year
comparisons to our current financial results. These adjustments to our GAAP
results are made with the intent of providing both management and investors a
more complete understanding of UTStarcom's underlying results and trends. In
addition, these adjusted pro forma non-GAAP results are among the information
management uses as a basis for our planning and forecasting of future periods.
The presentation of this additional information is not meant to be considered
in isolation or as a substitute for results prepared in accordance with
generally accepted accounting principles in the United States.


    Q3 Earnings Release Conference Call - November 6, 2008
    Reconciliation of 2007, Q1 2008 and Q2 2008 pro forma non GAAP Information
    $ in millions

                                                                 Consolidated
               Consolidated Consolidated Consolidated                GM as
                  GM as        GM as       GM as    Consolidated  Reported
                 Reported     Reported    Reported       as          in
                    in           in          in        Derived       Full
                 Q1 2007      Q2 2007     Q3 2007       from     Year 2007
                 Form 10Q     Form 10Q    Form 10Q   10Qs & 10K   Form 10K
    GAAP Gross
     Profit         $75          $80        $64         $102        $321
      GAAP Gross
       Margin %      16%          15%        10%          13%         13%

    Less: PCD
     Segment Gross
     Profit(a)       17           16         27           36          95

    Add: Handsets
     Gross Profit
     from sales
     to PCD(b)        1            2          2            1           7

    Total Non-
     GAAP Gross
     Profit         $59          $66        $39          $71        $233

    Non-GAAP Gross
     Margin %        22%          26%        16%          24%         22%



                                      Consolidated  Consolidated
                                         GM as         GM as      Consolidated
                                      Reported in   Reported in     GM as
                                        Q1 2008      Q2 2008     Reported in
                                       Form 10Q     Form 10Q       Q3 2008
    GAAP Gross Profit                     $92          $82           $57
       GAAPGross Margin %                  16%          13%           32%

    Less: PCD Segment Gross Profit (a)     33           36             0

    Add: Handsets Gross Profit from sales
     to PCD (b)                             2            0             0

    Total Non-GAAP Gross Profit           $61          $46           $57

       Non-GAAP Gross Margin %             32%          19%           32%

    (a) Effective July 1, 2008 the PCD segment was divested by the Company

    (b) The pro forma adjustment reflects estimated gross profit from products
    sold to PCD, as if PCD was a third party entity. For consolidated
    reporting purposes these sales were considered intercompany sales and
    eliminated in consolidation.



                               UTSTARCOM, INC.
  RECONCILIATION OF GAAP OPERATING EXPENSES TO PRO FORMA NON-GAAP OPERATING
                                   EXPENSES
                               ($ in millions)
                                 (Unaudited)

To supplement our condensed consolidated financial statements presented on
a GAAP basis, UTStarcom uses certain pro forma non-GAAP measures which are
adjusted to present those metrics as if PCD had been divested prior to each
time period reflected below. We believe this enables year over year
comparisons to our current financial results. These adjustments to our GAAP
results are made with the intent of providing both management and investors a
more complete understanding of UTStarcom's underlying results and trends. In
addition, these adjusted pro forma non-GAAP results are among the information
management uses as a basis for our planning and forecasting of future periods.
The presentation of this additional information is not meant to be considered
in isolation or as a substitute for results prepared in accordance with
generally accepted accounting principles in the United States.


    Q3 Earnings Release Conference Call - November 6, 2008
    Reconciliation of 2007, Q1 2008 and Q2 2008 pro forma non-GAAP Information
    $ in millions

              Consolidated Consolidated Consolidated Consolidated Consolidated
                 OPEX as     OPEX as      OPEX as     as Derived    OPEX as
              Reported in   Reported in  Reported in    from       Reported in
                Q1 2007     Q2 2007       Q3 2007     10Qs & 10K  Full Year
                Form 10Q    Form 10Q      Form 10Q               2007 Form 10K
    GAAP
     Operating
     Expenses      $128        $135          $116         $155         $534
    Less: PCD
     Operating
     Expense (a)      9           8             7            7           31
    Non-GAAP
     Operating
     Expense       $119        $127          $109         $148         $503


                     Consolidated   Consolidated   Consolidated
                       OPEX as        OPEX as        OPEX as
                     Reported in     Reported in    Reported in
                       Q1 2008         Q2 2008       Q3 2008
                       Form 10Q       Form 10Q
    GAAP
     Operating
     Expenses            $123            $113           $92
    Less: PCD
     Operating
     Expense (a)            8               8             0
    Non-GAAP
     Operating
     Expense             $115            $105           $92

    (a) Effective July 1, 2008 the PCD segment was divested by the Company



                               UTSTARCOM, INC.
  RECONCILIATION OF GAAP OPERATING LOSS TO PRO FORMA NON-GAAP OPERATING LOSS
                               ($ in millions)
                                 (Unaudited)

To supplement our condensed consolidated financial statements presented on
a GAAP basis, UTStarcom uses certain pro forma non-GAAP measures which are
adjusted to present those metrics as if PCD had been divested prior to each
time period reflected below. We believe this enables year over year
comparisons to our current financial results. These adjustments to our GAAP
results are made with the intent of providing both management and investors a
more complete understanding of UTStarcom's underlying results and trends. In
addition, these adjusted pro forma non-GAAP results are among the information
management uses as a basis for our planning and forecasting of future periods.
The presentation of this additional information is not meant to be considered
in isolation or as a substitute for results prepared in accordance with
generally accepted accounting principles in the United States.

    Q3 Earnings Release Conference Call - November 6, 2008
    Reconciliation of 2007, Q1 2008 and Q2 2008 pro forma non-GAAP Information
    $ in millions
                                                                  Consolidated
              Consolidated  Consolidated  Consolidated  Consolidated Operating
               Operating     Operating     Operating     as Derived  Loss From
               Loss From     Loss From     Loss From        from     Full Year
                Q1 2007       Q2 2007       Q3 2007        10Qs &    2007 Form
                Form 10Q      Form 10Q      Form 10Q        10K         10K
    GAAP
     Operating
     Loss        ($52)         ($55)         ($52)          ($53)      ($212)

    Less: PCD
     Segment
     Gross
     Profit (a)    17            16            27             36          95

    Add:
     Handsets
     Gross
     Profit
     from sales
     to PCD (b)     1             2             2              1           7

    Add: PCD
     Operating
     Expense (a)    9             8             7              7          31

    Non-GAAP
     Operating
     Loss        ($59)         ($61)         ($70)          ($79)      ($269)



                    Consolidated        Consolidated         Consolidated
                 Operating Loss From  Operating Loss From  Operating Loss From
                  Q1 2008 Form 10Q     Q2 2008 Form 10Q         Q2 2008
    GAAP Operating
     Loss              ($31)                ($31)                ($35)

    Less: PCD
     Segment Gross
     Profit (a)          33                   36                    0

    Add: Handsets
     Gross Profit
     from sales to
     PCD (b)              2                    0                    0

    Add: PCD
     Operating
     Expense (a)          8                    8                    0

    Non-GAAP
     Operating
     Loss              ($54)                ($59)                ($35)

    (a) Effective July 1, 2008 the PCD segment was divested by the Company

    (b) The pro forma adjustment reflects estimates from activities with PCD,
        as if PCD was a third party entity. For consolidated reporting
        purposes these activities were considered intercompany and eliminated
        in consolidation.

SOURCE UTStarcom, Inc.