At this time I would like to welcome everyone to the UTStarcom Third Quarter 2007 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question and answer session. [Operator Instructions] I will now turn the call over to Mr. Hong Lu, please go ahead sir.

Thank you Dennis. Good morning and thank you for joining us today. I am Hong Lu, UTStarcom Chief Executive Officer and I am pleased to host today’s call with Fran Barton our Chief Financial Officer and Peter Blackmore our Chief Operating Officer. The agenda for today’s call is as follows: Peter will begin the call with a discussion of the business units and operational updates, after which, I will give an update on the China market, Fran will then discuss our Q3 financial results, give an update on liquidity and finally he will discuss the thoughts on Q4. Then, we will turn the call over to Q&A. Before we begin with the formal remarks I would like to remind everyone that some of the information we will discuss today constitutes forward looking statements, actual results could differ materially from our current expectations. To understand the risks that could cause results to differ please refer to the risk factor identified in our latest Annual Report on Form 10-K and our Quarterly Report on Form 10-Q and Current Report on Form AK, which are filed with the Security and Exchange Commission. With that I would like to turn the call over to Peter.

Thanks Hong and good morning everybody. Over the last four months, I think you’ll recall, that is since the completion of the previous strategic alternative study by the Board, management has been working with a very high sense of urgency to put the company back on track for profitable earnings growth. We have taken a number of steps and this has included a complete strategic review of the company, which was completed within nine weeks. A thorough evaluation of each of our technologies and businesses, which were then positioned into core and non-core assets. The creation of new business units to both focus the company and also to enable the alignment into core and non-core businesses. This was announced and will be completed by the end of quarter four. Extensive internal communications to ensure all parts of the company are energized. Restructuring to get the right level of cost base going forward, this will also be completed by the end of quarter four. Strengthening our go to market operations in both international and China and Hong will be addressing the progress in China later, and completing a worldwide OEM Agreement with a very large global partner, and our plan is to have two or three worldwide OEM partners in 2008. With each of these steps we are confident we have taken the right actions to get the company back on track. We were careful to protect the R&D investment in our new products. Almost all of our future revenue growth will come from technologies that are early in their lifecycle. It was tempting to cut R&D more and get to profitability earlier, but that would have been a strategic mistake. In some ways, you have to think of UTStarcom today as a large startup. Our previous technologies such as PAS…

Thanks Peter. As you know, I have spent the vast majority of my time in China since the beginning of June. The bulk of my time has been spent in three key areas: One, focusing the business on our future strategy. The strategy now includes broadening our sales plans to include broadband access products, GEPON and Optical transport. Whereas, historically, we primarily concentrated on PAS and more recently IPTV sales. Two, I have also spent a considerable time on customer relationships, and finally, the infrastructure improvement. I will discuss each of these in more detail in this call. Beginning with the business and strategy. Despite the continuing rate of decline in the PAS business, I believe with our new self strategy we have some significant market opportunities in China that could drive overall market growth in 2008 and beyond. Beginning with the PAS market, we are seeing continuing decline in the core infrastructure market as aggressive pricing competition from China Mobile and China Unicom, it’s affecting subscriber additions. We still have considerable backlog in the PAS infrastructure business so that revenues are declining at slower rates but bookings are declining at the current rates of the overall market decline. At the same time, we believe there are opportunities to extend the life of the PAS business in China. For example, we are in active discussion with both China Telecom and China Netcom to upgrade their network to include higher speed 128k packet data service. In fact, we are in the progress now of submitting the proposal to China Telecom to expedite their entire network deployment. While it is too early to forecast this opportunity to provide additional PAS revenue to offset products overall decline in the next year or so. If this happens, we would also provide us with the…

Thank Hong. Let me begin by discussing our financial results for the third quarter of 2007. Revenue for the third quarter of 2007 was $646 million, which represents a sequential increase of approximately $108 million or 20% from Q2. Our overall revenue increases in the quarter can be attributed to three primary items. First, growth in the PCD business, Q3 PCD sales were $458 million as compared to $358 million in Q2, an increase of 28% sequentially. Secondly, growth in the international broadband business, broadband revenues were $42 million in Q3 2007 compared to $39 million in Q2 2007, an increase of 8%. Third, wireless revenues were up approximately 7% sequentially. This was partially offset by a sequential decline of 5% in the terminals business as the PAS market continues to decline. However, our overall book to bill ratio in Q3 was 1.2. PCD revenues represented approximately 71% of total sales in the third quarter. By geography, sales in China represented approximately 19% of total sales in the third quarter. Gross margins – because PCD was a much higher percentage of sales in the third quarter, overall gross margins were lower and came in at approximately 10% of sales. In addition, wireless and broadband margins were both lower in Q3 because of an additional $10 million inventory reserve taken during the quarter. These reserves are the result of our decision to exit some product lines and to reevaluate our forecast as part of our restructuring plans. Wireless margins were also affected by the recognition of some low margin non-core revenue in the quarter. On a positive note, PCD margins improved sequentially and were approximately 5.9%. SG&A expenses inclusive of stock compensation were approximately $70 million or 11% of sales in the quarter. The sequential decline is primarily attributed to a…

[Operator Instructions] Mike Ounjian – Credit Suisse First Boston: Fran, just to start on the liquidity side on that update was helpful, just a couple quick questions. So, obviously, the equity investments gained some values since the quarter was reported. Could you talk about some plans to potentially lock in that value, as it may not be ideal to just sell everything at once, but are there options to at least lock in some of the profits just to make sure the balance sheet doesn’t deteriorate on the equity markets?

Yes, Mike, there are those opportunities. As we have said in the past, consistently, we are trying not to go into too much detail about the plan. I think we are aware of all the options we have, I will say that in the last week we have begun monetizing some of that investment so for now I will just say that. Yes, I understand your point and we are certainly looking at that. Mike Ounjian – Credit Suisse First Boston: Great, you mentioned also that there had been to date this quarter a sale within the IPR portfolio already, is that something that we should consider to be material or was that just more to highlight there are opportunities there that could get more material over time?

Mike is that, this particular one is not material, in our extensive portfolio; we have a number of older patents that maybe aren’t that useful to us and in some cases some non-core patents. Those are being looked at for sale. We have sold one and we expect in 2008 that there could be some significant numbers in there, but not at this time. Mike, if I could emphasize too, I want to be careful that people don’t misunderstand, many of our IP patents are also very core and obviously we are not going to be selling those, we will be licensing those or extracting value that way, so I want to make sure to make the distinction between the core and the non-core patents. Mike Ounjian – Credit Suisse First Boston: Great, that is helpful. Turning to orders, you mentioned book to bill at 1.2 in the quarter, could we get some picture of what the mix looked like, sort of PCD relative to some of the core businesses?

Yes, Mike, I don’t have that in front of me, but I can say that PCD is particularly strong. Of all of the areas, PCD was the strongest, where we are just having tremendous orders coming in right now we are looking for a very healthy continuation of those orders and healthy revenues in Q4 and into 2008. I would say that PCD led the charge there. Mike Ounjian – Credit Suisse First Boston: Peter, just to hit on a couple of points you made. First you mentioned the plans or expectations for two or three global OEM relationships in 2008 if I remember that correctly. Could you give us some more color as to what the strategy is for OEM’s versus selling directly to carriers and any update as to how far along that process is in terms of discussions?

I’m delighted to Mike. We have concluded the first arrangement and bookings are beginning to appear on that and we are using it to sell our range of MSTP, MSAN and GECON in the first arrangement and we are targeting areas around the world where we have presence but we don’t have a large direct sales force, for example, that could be Latin America, Indonesia, Russia. Now, we want to extend that with one or two more worldwide organizations. For the OEM’s we differentiate between regional ones which are local regions and can sign up to help a particular project for these worldwide OEM’s we are looking to sell our portfolio particularly the Optical products and to really use their capabilities with carriers where they have better relations than we are and also to minimize our direct cost of direct sales. I hope that makes sense Mike. Mike Ounjian – Credit Suisse First Boston: Yes, it does make sense. In terms of the one you already completed, you can’t share the name, is it possible to give us some color as to say it is more of a global western vendor, is it one of the Asian OEM’s, any color you can give?

It is a global Asian vendor and we hope to be able to announce it, but cannot do it just yet. Mike Ounjian – Credit Suisse First Boston: Lastly, on the R&D and SG&A target as a percent of non-PCD sales I would agree that is a more effective way to look at it but obviously currently a long way from your target. Could you give us some color in those targets, how you are thinking about how much comes from cost cutting versus how much comes from expectations of revenue growth?

It’s the latter, basically we have taken the cost factions that we have described those will flow through into 2008 and what we did was assess the revenue ramp from bookings we currently have plus confidence of orders that will come that we could get revenue recognition with later in 2008 so that drove the ratios. Now the dependency there is on revenue recognition which I was cautious about because it can slip from out of the core easily if a carrier delays their implementation. Mike Ounjian – Credit Suisse First Boston: Right, fair enough, but its fair to think of it a target for the end of 2008 or early 2009 depending on revenue recognition.

That is correct. Mike Ounjian – Credit Suisse First Boston: Thank you very much for taking the questions. Larry Harris – Oppenheimer: With respect to the cycle for IPTV what sort of time frame should we be thinking about in terms of the time between order and when you ship the products and then from the time that you ship the products until revenue is recognized and then from the time when revenues are recognized and you have cash collection. Talking about a time frame of a year or two years, could you somehow size that up?

The orderer usually takes the partial down payment and so we typically will ask our customer to pay a certain down payment, anywhere between 10-50% down payment when we deliver the product and typically we will deploy the product and put into the services, that could be anywhere between three months to six months and we will probably by then talking about the expansion and we have some condition if they ask us to deliver certain features and based on that particular agreement with the company we will then, depending on that agreement, to recognizing the revenue or not. But are very concerned about the payment terms, so therefore, we wanted to make part of payment earlier and as much as we can so hopefully the model would be about 60% when we complete our delivery and the remaining part to be when a year or so to collect it. Larry Harris – Oppenheimer: With respect to the targeted income statement ratios relative to gross margins SG&A and R&D and as I recall the SG&A and R&D were overstated excluding PCD on the other hand PCD at least right now is about 70% of revenues. How should we be looking at operating expenses at PCD or should we be looking at them as being at the 4-5% of sales range, any help there would be good?

Can you restate your last part because I didn’t know what you are talking about 4-5% operating expense for PCD, did you mean gross margins? Larry Harris – Oppenheimer: Gross margins right now at PCD are at 6% correct?

Just under six yes. Larry Harris – Oppenheimer: I’m assuming there is a nominal level of R&D or at least a lesser percentage of R&D because of the devices that are sold from HTC, [Curital] and others. What I’m trying to get the operating expenses for the total company are likely to be, because PCD is at least for now is still a significant percentage of total revenues.

Let me help a little bit there. PCD as we know it doesn’t really have any R&D. The company does but we actually classify that right now as our terminals business unit. For the products we design for ourselves they aren’t in PCD P&L. For PCD’s P&L all you will see, and if you look at the segment reports in the 10-Q and so forth you will see gross margin and a little bit of SG&A on top of that a couple of points. Predominately all of the objects $135 million per quarter that the company has been running at very very high levels that’s nearly all the non-PCD business and that number I think we have given indications and we are in fact on track to get that down into the 115-120 level, the ratios that Peter gave really for PCDL are talking about having revenues basically increase while expenses are flat or slightly down. PCD’s operating expenses are relatively fixed and flat so as their revenues go up and their gross margins do whatever they do, they don’t typically incur any more operating expense, so their incremental margins blow through to profit. I rambled there a little bit but I don’t know if I got to answer the question you were asking. Larry Harris – Oppenheimer: That’s helpful, thank you.

Thanks

Fran, can you give us some status on the lines of credit in China and also convert coming due in March?

The China lines of credit as we have said in the past, as each of them come due, we have been fortunate in the past to renew them and our expectation is to continue that through Q4 and into the new year. We did in the last quarter take down some additional loans of about $35 million on our China lines. From time to time those move up and down. Sometimes, just to use them just to make sure they know we are there and then we pay them back a quarter later. So far nothing has changed with respect to the China lines other than the fact that we used it a little bit last quarter. With respect to the convert, it is still due in March and as we have indicated in the past, we have a number of options to deal with that starting with refinancing some or all of it, repaying some or all of it, monetizing assets, monetizing some of these short term investments. There is a string of options and we are holding all of those options and we’ll do the right thing in the appropriate time. Now we are all caught up starting today with our financials and we are in our quiet periods are closed, our financial are current, so now we’ll go to work and work on those multiple strategies that I just mentioned. I’m not going to tell you exactly what the sequence is because the guys on the opposite side, it’s bad enough they know my strategy I don’t want them to see all my cards too.

I understand.

At this time there appear to be no further questions. Are there any closing comments?

We just thank everyone for paying attention and tuning in at this relatively early time of day today. We are very pleased that we did get to file Friday on time and if we had the luxury of having the call after markets or something we would have done that but we wanted to get our conference call as soon as possible after our filing and this was the first available moment that we could get you all together. We encourage you to check in and talk with us now we are totally up to date on all our filings, we feel good about that. I won’t rehash what we went through today but thank you all for tuning in and look for you on the next conference call.