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UTStarcom Releases Preliminary Fourth Quarter 2005 Financial Results

ALAMEDA, Calif., Feb. 9 /PRNewswire-FirstCall/ -- UTStarcom, Inc.
(Nasdaq: UTSI), a global leader in IP-based, end-to-end networking solutions
and services, today reported preliminary financial results for the fourth
quarter of 2005. The Company also announced that its Audit Committee has
initiated an investigation surrounding the circumstances of a specific
contract in India signed in 2002.

UTStarcom Releases Preliminary Fourth Quarter 2005 Financial Results
UTStarcom Releases Preliminary Fourth Quarter 2005 Financial Results

- Fourth Quarter Revenues of $685.5 Million, Gross Margins of 12.1%, and Loss Per Share of ($0.17)

- Positive Cash Flow from Operations of Approximately $126 Million in the Fourth Quarter

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The Company will conduct a conference call today, Thursday, February 9, to
discuss these results. The call will take place at 1:30 p.m. PST/4:30 p.m.
. (Please see Conference Call section below for dial-in information).

'We are pleased that our initial results for the fourth quarter are
in-line with, and in some cases are better than, our guidance for the
quarter,' stated
Fran Barton, executive vice president and chief financial
officer of UTStarcom. 'We are also pleased with the continued improvements to
the balance sheet and the strong cash flow we generated from operations.'


At the request of the UTStarcom management team, the Audit Committee of
the Board of Directors of the Company has initiated an investigation by
independent counsel with regard to the circumstances surrounding the premature
recognition of revenue on a contract with a customer in India, and other
related issues. The Company recognized approximately $22 million in revenue
on the contract, with total gross margin of less than one million dollars.
This revenue was recognized during several of the quarters from 2003 through
2005. At the conclusion of this investigation, the Audit Committee will
assess the findings, and will evaluate the materiality of any adjustments to
determine if previously issued financial statements need to be adjusted.

Preliminary Results (before adjustments, if any):


Net sales for the fourth quarter of 2005 were $685.5 million, above
Company guidance. Fourth quarter sales include $40 million in revenue related
to the Softbank BB IPTV contract.

Gross Profit Margin:

Consolidated gross profit margin for the fourth quarter was 12.1%, at the
low end of Company guidance due to additional inventory and warranty reserves
taken in the quarter.

Operating Expenses:

Total operating expenses for the fourth quarter were $142.3 million.
Included in this total are restructuring costs of approximately $11 million,
as well as a benefit from the reduction in the Company's allowance for bad
debt. Approximately $12 million of this benefit resulted from strong
collections on previously reserved accounts receivable balances, and a further
benefit of $8 million was due to updated estimates on the remaining balances

Net Interest and Other Income/Expense:

Net Interest and Other Income for the fourth quarter was approximately
$40 million, which is primarily attributed to a gain recorded on the sale of
the Company's stake in the Softbank China Fund.

    Income Tax Expense:
    Income tax expense for the fourth quarter was approximately $2.5 million.

    Net Loss/LPS:

Our net loss for the fourth quarter was $20.6 million, or ($0.17) per
share, inclusive of all one-time charges and gains.

    Key Balance Sheet Items (as of December 31, 2005):

     *  Cash and short-term investments:  $658.9 million.
     *  Accounts receivable:  $525.1 million.
     *  Day sales outstanding:  approximately 69 days.
     *  Total Inventory, (including deferred costs/Inventories at customer
        sites under contracts):  $625.4 million.
     *  Inventory turns:  approximately 3.7
     *  Total debt:  $473.7 million.

    Cash Flow:

     *  Cash generated from operations during the fourth quarter of 2005:
        approximately $126 million.

The preliminary results reported above are subject to finalization pending
the completion of the Company's aforementioned investigation and will be
reported in the Company's Annual Report on Form 10-K.

    Consolidated First Quarter 2006 Guidance

    Total Revenues:               Approximately $505-$535 million
    Gross Profit Margin:          Total Company:  12-14%
    Operating Expenses:           Approximately:  $145 million, including
                                  approximately $6.3 million in expenses
                                  associated with stock options
    GAAP EPS:                     Loss of approximately ($0.65) to

    Conference Call

The Company will conduct a conference call, which is open to the public,
to discuss these results. The call will take place at 1:30 p.m. (PST). The
conference call dial-in numbers are as follows: United States -- 888-398-3046;
International -- 706-634-2492.

A replay of the call will be available from approximately 5:30 p.m. (PST)
on February 9, 2005 to 11:59 p.m. (PST) on February 16, 2005. The conference
call replay numbers are as follows: United States -- 800-642-1687;
International -- 706-645-9291. The Access Code is 4703306.

Investors will also have the opportunity to listen to the conference call
and the replay over the Internet through UTStarcom's Web site at:

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.

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 broadband,
wireless, and handset 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 design operations in the United States, China, Korea
and India. UTStarcom is a FORTUNE 1000 company.

For more information about UTStarcom, visit the company's Web site at

Forward-Looking Statements

This release includes forward-looking statements, including the foregoing
statements regarding the anticipated results for net sales, consolidated gross
profit margin, operating expenses, including the amount of restructuring costs
and allowance for bad debt, net interest and other income, income tax expense,
net loss and loss per share, and cash generated from operations for the fourth
quarter of 2005, the expectation that results for the fourth quarter of 2005
are in-line with, and in some cases are better than, the Company's guidance
previously given for the quarter, the anticipated cash and short term
investments, accounts receivable, days sales outstanding, total inventory,
inventory turns and total debt as of December 31, 2005, the anticipated timing
and results of the Audit Committee's investigation of a contract in India and
the manner of reporting results related to such contract by the Company, and
the guidance provided with respect to anticipated total revenues, gross profit
margin, operating expenses, including expenses associated with stock options,
and GAAP loss per share for the first quarter of 2006. These statements are
forward-looking in nature and subject to risks and uncertainties that may
cause actual results to differ materially, including possible accounting
entries and adjustments that may be made to the Company's financial statements
as part of the close of the books for the quarter and year ended December 31,
and/or in connection with the review of a contract. These risk factors
also include rapidly changing technology, the changing nature of global
telecommunications markets, the termination of significant contracts and/or
strategic relationships, the direction and results of future research and
development efforts, evolving product and applications standards, reduction or
delays in system deployments, product transitions, potential non realization
of backlog, changes in demand for and acceptance of the Company's products,
general adverse economic conditions, and trends and uncertainties such as
changes in government regulation and licensing requirements. The Company also
refers readers to the 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.

SOURCE UTStarcom, Inc.