Call held only by Barton and Blackmore since Lu is in China. The results of Q2 was not good with a loss of $62mil compared to $54 mil in Q1. For the 6 months, they used up $149 million in cash ($85 mil in operating loss) and $64 mil for reduction in accts payable. PCD GMs went from 5.8% to 4.4% but revenue went up to $358m. SG&A went from $80m to $89m in the 2nd quarter due to added increase related to investigations. R&D stayed consistent at around $42 million so OPEX is still $131m while GMs are only 14.8%. Inventory stayed constant at 655/653 million.

Book to Bill was 1.2 for Q1, 1.0 in Q2 and Q3 so revenue going forward is going to go up but made primarily of low margin PCD. Q3 forecast is for GM decline of several points. An analyst quickly added it up and came to the conclussion that losses could be even more in Q3. Revenue was projected to go up mid teen digits so that would be around $619m. At a GM of 12%, that would give gross profits of only $74 million. SG&A has been on a decline (excluding one time charges such as for the investigations). If we take $80 million (Q1) and its declining a bit to say $77 million for Q2 and to $74m for Q3, that would still leave the entire R&D as the loss ($42 million loss). Cash is projected to be breakeven with a $35 million coming out from operationgs being supplemented by $35 million in short term borrowing from China. So, they are still very far from being profitable.

So, when is this company going to be profitable. The last analyst (Bill Choi?) asked the probability of UT being profitable in 2008. Barton/Blackmore wanted to address this in the Nov call but obviously mentioned they are driving towards it. This is disappointing because on one of the earlier calls, Barton had mentioned they would be cash flow and GAAP profitable in 2008. Before the Q&A, Blackmore addressed what they are doing to get margins up. The number one thing is inventory reduction (mostly handsets) up to 10%. They are in talks with suppliers and will implement starting in Q1 2008. Projected cash savings of $50 million. With revenue in the PCD trending up, this could make up to $1.5 billion in revs for 2008. No guidance in this call for GMs in 2008 although high single digits to 10% was mentioned previously (don't know if they can accomplish this with a decline to 4.4% this quarter).

Also "studies" for infra inventory are being done and set to be completed by end of Q4. Outsourcing and global procurement systems will be in place to improve those aspects. In terms of GMs, Barton gave some color to this with Japan broadband at 40+% India Goverment at single digits and India private at 35%. Those are ballpark figures but thats why the large Indian contracts may not yield the upside that we "retail" holders expect. Anyway, if we get private operators in India, that would be much better.

So, Q4 will be better than Q3 and Q1 2008 will be better than Q4 but the question is how long it will take and how much they will burn to get through the process. Important questions that right now is not favorable for shor term hopes of analyst upgrades/price target increases.

Barton did spend some time in addressing shareholders that stuck with the company through all of this, thanking them for their support. Bill Choi also asked why not monetized the Gemdale holdings and Barton basically said they can't disclose fully their plans but that is an option they have already mentioned. Bill Choi has a $4.25 target and if he got positive responses would probably react favorably but its a hold at best with this conference.

Liquidity- Barton mentioned they can repatriate more if necessary.