UTStarcom reported preliminary financial results for the fourth quarter of 2005 and also announced an investigation surrounding the circumstances of a specific contract in India signed in 2002.
Net sales for Q4 were $685.5 million, above the company’s guidance. Fourth quarter sales include $40 million in revenue related to the Softbank BB IPTV contract. Consolidated gross profit margin for the fourth quarter was 12.1%. The net loss for the fourth quarter was $20.6 million, or ($0.17) per share, inclusive of all one-time charges and gains.
The investigation by the independent counsel will look into the premature recognition of revenue on a contract with a customer in India, and other related issues. UTStarcom 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. Adjustment to prior financials may be necessary.
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