Welcome everyone to the UTStarcom quarter one earnings conference call. (Operator Instructions) Mr. Hutton, you may begin your conference.

Earlier today, we issued a press release announcing our financial results for the first quarter 2008. We also expect to have our first quarter 10-Q on file with the SEC by tomorrow. Today’s earnings call will be hosted by Hong Lu, our Chief Executive Officer; Peter Blackmore, our Chief Operating Officer; and Fran Barton, our Chief Financial Officer. Hong will open the call with a brief update on the company’s leadership transition. Peter will then give an overview of our strategic execution and competitive successes. And Fran will follow with a discussion of our first-quarter financial results and second-quarter guidance. After our formal remarks, we will open up the call to take your questions. Before we begin, I would like to remind everyone that some of the information we will discuss today constitutes forward-looking statements. But actual results could differ materially from our current expectations. To understand the risks that would cause results to differ, please refer to the risk factors identified in our latest annual report on Form 10-K and in our quarterly reports on Form 10-Q and our current reports on Form 8-K filed with the Securities and Exchange Commission. We would now like to begin the call with some opening remarks from Hong Lu, our Chief Executive Officer.

Before we give an update on our company’s financial and operational results, let me take a few moments to update you on the progress towards our previously announced leadership transition. We’re still very much on track with Peter succeeding me as the CEO effective July 1, at which time I will resume the role of the Executive Chairman. All of this is, of course, subject to final Board’s approval at the time. Peter has been with us now since July 2007. Since that time, he has made very good progress getting to know our business in detail and driving both strategic focus and operational effectiveness. Over recent months, he has progressively taken over more responsibility. In fact, many of the functions that have been reporting to me are now reporting directly to Peter. In addition to his formal responsibilities, Peter now directly oversees finance, HR, and CTO office, the personal communication division and our handsets business unit. The final remaining function to transition to Peter will be our China sales and marketing organization, which we plan to transition prior to July 1. As Executive Chairman, in addition to continuing my Board-related duties, I will look forward to being an ambassador for UTStarcom, where I will focus on our customers’ relationship as well as recommending new business model and technologies to drive future growth for the company. This is an exciting point of transition of all of us, and Peter and I are working towards a very smooth sendoff. Now, I would like to ask Peter to give an update on our operations.

As I’m sure everybody knows, from June to August of 2007, we conducted a broad strategic review of our business and our competitive position. Last September, we then announced our strategy built around a product suite led by IPTV, our next generation softswitch, and the related IP broadband products. We also said we would target these offerings at specific geographic markets, which offer the most opportunity for growth. This focus on our core business areas of multimedia and broadband is beginning to pay off. Customers appreciate the tighter focus of our business, and we are now better at selecting specific accounts and geographies where we believe we can really differentiate our offering from the competition. I will mention a few specific customer examples when I discuss the particular business segments in a few minutes. Also in September, we designated certain segments such as our personal communications, mobile solutions and custom solutions business units as non-core segments. At the time, we stated that it would make strategic and financial sense to look at alternatives in these businesses, and we are actively doing that. However, the timing and execution of such transactions is obviously dependent on many factors. But we remain clear on our strategy. We want to focus on the core businesses. In the meantime, we continue to manage these other areas tightly, and in recent quarters, we have seen some significant improvements. In particular, the quarter one results were very strong in PCD as reflected in both revenues and gross margins. And I want to say that the management team at PCD continues to do an exceptional job. The strategy announced in September also places a premium on greatly enhanced internal operations. We formed the business transformation office to drive management actions around operational and financial discipline. Some areas of…

Now I’d like to start the China discussion with an update on the earthquake. We are very fortunate in that none of our operations or employees or those of our joint venture partner were affected by the tragedy. However, many others were not so lucky, and we wish to extend our sympathy to many people that have been impacted. It has been widely reported that the whole both GSM and CDMA networks in an area went down due to the earthquake, our PAS networks stayed up and, in fact, played an active role in initial emergency response. To further assist in the recovery effort, we are donating approximately 2,000 handsets for the first responders in the area. And our service engineers are on-call 24 hours a day to support the rescue efforts. In addition, both the company and its employees are making a donation to assist in an area. In China, the company has donated approximately RMB1 million plus the China employees have donated approximately RMB250,000 outside of China, where having established the relationship with the International Red Cross and the Red Crescent Societies, so our employees can make donations directly to the China relief effort. Now, let me transition to a discussion of our China business. Our strategy in China is focused on three things. One, growing IPTV and the related products; two, initiate a jump start on the broadband activities; and three, manage the declining trend in PAS as much as possible. Now let me start with IPTV. With respect to IPTV, we had approximately 583,000 subscribers in China at the end of April, representing over 60% of market share. This is an increase of approximately 87,000 subscribers since we last updated the number during our year-end conference call and showed a nice acceleration in the market. We…

The company enjoyed a better than expected first quarter, and the results were seen in both the revenues and gross margins across all the segments. Total revenues were $586 million, a 23% increase from the first quarter of 2007. Our gross margins during the quarter were 15.7%, essentially flat with the same period a year ago. The operating expenses of $123 million were expected for a few reasons that I will outline in a minute. We also had the benefit of a few one-time items. All of these things combined resulted in a net income of $25 million, or an EPS of $0.21. Now, I will provide further details on the first quarter, focusing on the business unit results. I’ll start with the segment level details on our core business areas of multimedia communications, broadband and services. One, multimedia communications business unit revenues of $67 million versus $73 million in the first quarter of ’07, these revenues were primarily driven by PAS and next generation networks that contributed 97% of the total. Though PAS revenues increased by 15%, total revenue declined from the first quarter of 2007 because of a decline in sales of Q-Box and E-Box, which we exited in late 2007. We also had good bookings growth for IPTV. However, the revenue recognition on IPTV is such that the impact won’t hit our P&L for a period of time yet. Gross margins for multimedia were 49% this quarter compared to 31% in the first quarter of ‘07. This, again, was primarily due to a combination of product mix, a greater contribution of PAS and NGN revenues compared to 2007. Secondly, our broadband business unit, this business unit generated revenue of $26 million versus $27 million in the first quarter of ‘07. While the gross margins were 9% versus…

(Operator Instructions) Your first question comes from the line of Paul Wainer – DLS Capital Paul Wainer – DLS Capital: In your last call, you laid out some full-year revenue targets, and you expressed them in ranges. Would you like to comment on that, given the success of the first quarter?

Yes, I think generally, I don’t think we thought of them as targets, but more as indications of where we were heading. So I think generally speaking, we are confident that we’ve hit the first milepost in Q1 and, therefore, we should be on track to be in the range of those for the rest of the year, Paul. Paul Wainer – DLS Capital: I’d say you exceeded the first milepost. I’m wondering if it’s safer to assume that you’re closer to the top end of that range now.

Well, to be safe, I think we’ll just hold on that for right now. So it’s a little early. One quarter doesn’t make a year.

I’d like to have the second quarter behind us, Paul, for obvious reasons, and then we can perhaps give an updated guidance for the second half of the year. But let’s leave it at that for the time being if you understand. Paul Wainer – DLS Capital: The working capital improvements that you saw in the first quarter, you expect to be fully reversed. Or you don’t think there’s more to be squeezed out of there?

When you look over a period such as a year, you get a sense of where you’re heading. And we’ve been saying that for the year we looked like we’d probably be about neutral. In any given quarter, depending on when the inventory comes in and when the bills get paid, you can fluctuate up and down, up and down. And just as within the quarter, every month varies fairly dramatically, frankly. So the things that happened in Q1, a number of which, by the way, we drove operationally for our own reasons, will eventually settle back at, water seeks its own level. So we have improvements to make, we’ll continue to make. We needed to make those improvements, by the way, to get to zero for the year. So it wasn’t as if it was business as usual. So just to be clear to everybody, we could give back all of those gains. We could give back more than all of those gains in a quarter, and then we can get them back again in Q3, or it will fluctuate back and forth. But if you try to not isolate Q2 just as Q1 doesn’t make a year, Q2 doesn’t make a year. So at the half, we expect to be around breakeven. At the year-end, we expect to be around breakeven. And in between, we can fluctuate fairly dramatically. We’ll always try to fluctuate to the good side, but there will be quarters when we don’t. Paul Wainer – DLS Capital: The PC division is having so much success now. And obviously, is that changing the tenor of the talks you’re having, to dispose of that non-core asset? Or can you give us any update on the potential disposition of that asset?

As before, we really can’t, but I did say in my prepared remarks that I do think the future of the company is focused on the core businesses, and PCD is non-core, which gives you that we haven’t changed our position there. But we’re very pleased with the performance and we’ll work with them for the foreseeable future. But I don’t want to change the strategic position we’ve outlined in the past, because it still holds.

Your next question comes from Robert Galtman - Jeffries & Co. . Robert Galtman - Jeffries & Co.: First, going back to the PCD business, I know you mentioned that margins expected to be down in Q2. Can you just give us a little more color there? Obviously, the high-end handsets, HTC devices you mentioned helped out in Q1. But just what you’re seeing broadly in the market and how we should expect that to trend later in the year as well.

But generally, we had tremendous consumer satisfaction with the launch that was the very end of last year, some of the HTC Smartphones, and that played out through the first quarter. We would love to see that continue and perhaps it will and perhaps the follow-on replacement will do that as well. But I think the market has usually got a certain mix to it that we’ve been following over some time. So we are expecting to return back to the 6% or so gross margins, which we are very pleased with 6%, by the way. 6% is one of the highest we’ve ever done in our history. So we wouldn’t want to set the expectation of 7% or 7.6% or something like that going forward. But we will obviously sell as many high-end as we can and do that.

And PCD’s business really, the purpose of that is to try to get as many suppliers as you can. And right now, we have been successful to the extent that our supplier base is of course HTC, Sharp, Casio, Pantech and UTStarcom is one of them as well. And overall, we have been seeing the improvement in the margin overall. So it really depends on the mixture of that. But in the future, there is a higher potential that we will be accepting more other companies to participate. And once they will be able to do that, their margin position will be enhanced. And yet, this business is very, very difficult. And we have already achieved the highest margin quarter in our company’s entire history. And we don’t want it to say that can be repeated easily. But the tendency is that we wanted to keep that as a goal to be able to not only beat that, but we don’t want it to set the high expectation for every quarter at this time. Robert Galtman - Jeffries & Co.: Looking at the targets a little bit, I know with the OpEx target in particular, you mentioned that would look to bring OpEx down to $110 during the second half. I think last quarter you had maybe mentioned below $110 each quarter in the second half. Can you just give us some clarification around that? Is that $110 maybe later in Q4? Or would that be both in Q3, Q4 as well?

Well, we’ll target it for Q3. I think Q4 we should certainly be there. We’re not stopping at $110, and so the language we may have used was at $110 or just under $110 or whatever, so it’s not intended to be over $110. Its $110 or under. But we will hold the expectation for now at $110. As we get a couple of these one-timers behind us, we can start operating at that level shortly. So we will try for Q3, but we will certainly be there for Q4. Robert Galtman - Jeffries & Co.: On the gross margin side, I know that you mentioned last quarter, I think you were looking for 14% to 16% now, provided that toward the lower end. What is that delta? Which particular business line does that primarily come from?

So this is so mix dependent. So in the biggest, the first chunk is PCD at 6% or 7%, and the rest of the company at 30% something. Now the rest of the company at 30% something is also made up of everything from 10% sometimes on CPE and 15% on set-top boxes or 20%, up to 50% on some certain infrastructure products. So the first break is PCD, non-PCD. That’s the big swing factor. And then within the 30% plus rest of company, that can move up three or four points. If it’s PAS, it’s 50%. If it’s set-top boxes, it’s 20%. And so what we’re going to have to do is on a quarter-by-quarter, see which product lines are getting Rev-Rec that quarter, and that’s going to bounce around. So I would rather you not think of it as 15% or 14% or 17%. That is just a number that’s frankly meaningless. The low-margin distribution business is a business model, so the rest of the company is a business model with some low-end margins. So maybe I have over-explained it, but I’m not trying to avoid you, but I’m saying it really varies.

The key thing to remember is what Fran said in his prepared remarks, 36% guidance for the core business.

The non-PCD.

Non-PCD, and then 6.5% for the PCD business. And that mix drives the overall ratio. And obviously we aim to work on improving it all the time. But we’ve got to be sensible when we give guidance. Robert Galtman - Jeffries & Co.: Can you provide some color regarding the losses in India and what you have been able to do to improve that and how you don’t see that happening again in the future?

It’s all to do with one very, very large contract and the Phase I is complete. I think we’ve got just a few items to deliver, some CPE devices. So once that Phase I is behind us, and we have obviously accrued losses for that, and they were quite significant. But the other business we’ve got in India, as I tried to indicate from my remarks, are quite healthy margins. We’re very pleased with them. Obviously some of the revenue recognition in India gets delayed because under the GAAP rules [inaudible] brand-new business for us in India, so they get recognized as we apply the GAAP rules to it. But the underlying margin model is good and the bookings are good. So that’s why we are confident that we can manage that business well going forward. And we learned a lot from one large contract, and the benefit there from that contract has propelled us to a market share leadership position in India, which does have some value to us.

Yes, if I could just add, Peter, because I know one of the people, probably one of the follow-up questions that is probably going to come is the same question we get every time is, “Why do you keep having these things happen?” You can imagine a contract which the terms are fixed, and you bid and accept the terms you are given. And when there are features where it says what amounts to most favored nation pricing type terms. So if anybody comes up with a price for something we’ve got on our delivery list, that’s lower than we’ve been charging or we’re used to charging, we are obligated to honor that. And that type of language happens to us once in a while and we have to adjust, and that means we take an incremental loss. So things happened with competitive pricing structure from our competitors. So that hit us this quarter. Should we get this thing all delivered shortly, then we’re protected, once you’re delivered. It’s only while you’re still shipping and delivering products. So we’re nearly done on that phase in terms of delivery.

Your next question comes from Himanshu Shah - Shah Capital Management.

What are, on the non-core assets, your initial thoughts on the usage of cash when you do sell PCD division?

We haven’t sold anything yet but, as you can imagine, we try to think of those things and what would we do. So like every prudent management team, you take a look at your anticipated needs over the next year or two, and your anticipated sources, and you determine you’ve got excess cash. If you determine you’ve got excess cash, you’d better do something clever with it, and that would mean any number of things. One of your favorite questions is, “Would we do a stock buyback?” So that would go in the category of something you’d do if you determined you had excess cash. But one, we haven’t got the excess cash. We haven’t got any cash yet. We haven’t got any divestitures yet. But we have the classical list and we have our investment bankers and lawyers advising us, and we’re going through that list. We’re very understanding of what those options are. We have no decisions. If we had one, I wouldn’t be able to tell you right now anyhow. So I think you understand that as well.

What would be the OpEx, in that case when you do divest the non-core assets? If you have gauged, you can give us some guidance that would be great.

PCD varies around G&A of around let’s call it, $10 million a quarter. If that went that way that’s a number. If we looked at the IPCDMA business, I think it’s around $6 million or so per quarter. If we went that way, the custom’s business unit is probably, I don’t know, another $10 million a quarter or something like that. So those ranges, $6 to $10 for three different business units that are currently designated as non-core.

Hong, I got a question on the PAS data that you mentioned in your remarks, that from your studies it turns out to be a better solution. You’ve been talking about this since middle of third quarter of last year. You also mentioned about the order uptick in this quarter for the next quarter in your book-to-bill. Are we seeing some effects of that, or are we going to see PAS data products hitting your top line sometime in the second half of this year or beyond?

Well, Himanshu, we have actually gained some contracts in our infrastructures to upgrade them to be able to handle the packet mode. So we have tried out several cities already, and so we have been start making some delivery of our products. And some of the cities that we have been engaged in, for instance in Hangzhou, in a very short period of time, but they have increased their users close to 10,000 in about two or three months’ time. And typically, the ARPU is higher, so we are very pleased with the customers’ uptick. And when we start testing the region with the customers to put our product against the Edge product and CDMA 1x product and ours, and we clearly come up to be a more favorable solutions. And so therefore, our customer has decided to go with us. So in other regions that we start testing, such as in Beijing, Shanghai, Shanghai is really not up to the packet mode yet. They are still using the circuit mode, so their data speed, the maximum is 64K. But if you upgraded to the packet mode, they would be able to do anywhere between 80K and 110K, depends on the situations. So we wanted to be able to demonstrate to the other regions. Shanghai is one of the region we really want them to convert, but we haven’t convinced them to convert it to the packet mode at this time.

There are no further questions at this time.

Let’s close the call then. Thank you, once all again for joining us. Really appreciate it. Thank you.