UTStarcom delaying annual report again

0 Comments | Oakland Tribune, Apr 1, 2005

By Nicholas Yulico ALAMEDA — UTStarcom Inc. is again delaying the release of its annual report and restated 2003 financial results after admitting its staff lacks sufficient accounting knowledge.

The delay puts the Alameda telecommunications equipment maker at risk of defaulting on a series of bonds. It also means the company could be sued by the Securities and Exchange Commission and delisted by the Nasdaq Stock Exchange, where the company's common stock currently trades.

In a seven-page press release, UTStarcom listed several material weaknesses regarding its internal financial controls — including inexperienced accounting staff, ineffective controls over the identification of related party relationships, and a lack of monitoring of its accounting functions outside the United States.

UTStarcom, which is the largest provider of wireless phone systems in China, now says the report will be filed by April 15. It was supposed to be filed Thursday.

SEC spokesperson John Heine said he could not comment on the matter with regards to the company. But he did explain that public companies are allowed just one 15-day extension for filing an annual report. Since the SEC already granted UTStarcom an extension in mid- March, the company could now face a lawsuit.

"The commission has the authority to file civil actions in situations where the rules are violated, included filing deadlines," Heine said.

The SEC, however, has rarely filed civil actions for late filers. In 2003, it filed just one civil action for such a matter, according to the agency's annual report that year.

The Nasdaq requires companies to be compliant with their SEC filings or else face possible delisting. Nasdaq officials did not return calls seeking comment.

UTStarcom shares fell 89 cents, or 7.5 percent, to close at $10.95 on Thursday.

UTStarcom said the filing delay results in a technical default with respect to its 7/8 percent convertible subordinated notes due in 2008. An actual default has not yet occurred, however, and the company said it believes the infraction will be rectified once it files its annual report.

Nicholas Yulico can be reached at (510) 208-6468 or nyulico@angnewspapers.comnyulico@angnewspapers.com.