8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 1, 2008

UTSTARCOM, INC.

(Exact name of registrant as specified in its charter)

Delaware	000-29661	52-1782500
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

1275 Harbor Bay Parkway

Alameda, California 94502

(Address of principal executive offices)    (Zip code)

(510) 864-8800

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.01 Completion of Acquisition or Disposition of Assets.

As previously disclosed on Form 8-K filed with the SEC on July 7, 2008, UTStarcom, Inc. (the “Company”) entered into an agreement to sell UTStarcom Personal Communications LLC, a wholly-owned subsidiary of the Company (“PCD”), pursuant to a Merger Agreement (the “Merger Agreement”) by and among the Company, PCD, Personal Communications Devices Holdings, LLC (“Buyer”) and Personal Communications Devices, LLC, a wholly-owned subsidiary of Buyer (“MergerCo”).  The Merger Agreement provides for the merger of PCD with and into MergerCo, with MergerCo continuing as the surviving corporation (the “Merger”).  Buyer is an entity controlled by AIG Investments and certain other investors.

The total Merger consideration to the Company of approximately $240 million ($24.3 million of which is subject to escrow and may be subject to a post-closing adjustment to the purchase price, if any, and certain other contingencies as described in the Merger Agreement) is based primarily on the working capital of PCD as of the closing of the transaction, subject to certain adjustments.  Pursuant to the terms of the Merger Agreement, the Company may be entitled to receive up to an additional $50 million earnout payment in 2011 based on the achievement of forecasted earnings of MergerCo through December 31, 2010.  The Merger Agreement contains customary representations, warranties, and covenants, including indemnification obligations of the Company and Buyer.

The foregoing description of the Merger and the terms of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement.  The Merger Agreement is attached as Exhibit 2.1 to the Current Report on Form 8-K filed by the Company with the SEC on July 7, 2008 and is incorporated herein by reference.

On July 7, 2008, the Company issued a press release announcing Buyer’s completion of the acquisition of PCD effective July 1, 2008.  The full text of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.  Pursuant to the terms of the Merger Agreement, PCD merged with and into MergerCo, with MergerCo continuing as the surviving corporation.

Item 9.01 Financial Statements and Exhibits.

(b)               Pro Forma Financial Information

The pro forma financial information with respect to the transaction described in Item 2.01 is filed as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference.

(d)               Exhibits

Exhibit Number	Description
99.1	Press Release dated July 7, 2008
99.2	Pro Forma Financial Information

2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	UTSTARCOM, INC.
Date: July 8, 2008	By:	/s/ Francis P. Barton
	Name:	Francis P. Barton
	Title:	Executive Vice President and Chief Financial Officer

3

EXHIBIT INDEX

Exhibit Number	Description
99.1	Press Release dated July 7, 2008
99.2	Pro Forma Financial Information

4

EX-99.1

Exhibit 99.1

UTStarcom Completes Divestiture of its Personal Communications Division

ALAMEDA, Calif., July 7, 2008 — UTStarcom, Inc. (Nasdaq: UTSI), today announced that the divestiture of its Personal Communications Division (“PCD”) disclosed on July 1, 2008 was completed that same day.  The divestiture of PCD, to AIG Investments, represents a milestone in simplifying the operations of UTStarcom and enhances the company’s focus on its IP-based product offerings. The proceeds of approximately US$240 million, based primarily on the working capital levels on June 30, 2008 are subject to certain adjustments.  According to the agreement, UTStarcom could also receive up to US$50 million based on a three-year earn out provision.

About UTStarcom, Inc.

UTStarcom is a global leader in IP-based, end-to-end networking solutions and international service and support. The company develops, manufactures and markets its broadband, wireless and terminal solutions to network operators in both emerging and established telecommunications markets worldwide. UTStarcom enables its customers to rapidly deploy revenue-generating access services using their existing infrastructure, while providing a migration path to cost-efficient, end-to-end IP networks. UTStarcom was founded in 1991 and is headquartered in Alameda, Calif.  The company has research and development centers in the USA, Canada, China, Korea and India.

For more information about UTStarcom, please visit the UTStarcom Web site at www.utstar.com.

Forward-Looking Statements

This release includes forward-looking statements, including the foregoing statements regarding the anticipated amount of adjustments, whether the company’s operations will be simplified and whether the three-year earn out will

be attained.  These statements are forward-looking in nature and subject to risks and uncertainties that may cause actual results to differ materially. These risks include the risk factors identified in its latest Quarterly Report on Form 10-Q, as filed with the Securities and Exchange Commission.

UTStarcom Company Contact

Barry Hutton

Senior Director, Investor Relations

UTStarcom, Inc.

(510) 769-2807

barry.hutton@utstar.com

EX-99.2

Exhibit 99.2

UTSTARCOM, INC.

PRO FORMA FINANCIAL STATEMENT INFORMATION

(UNAUDITED)

The following unaudited pro forma condensed consolidated balance sheet information as of March 31, 2008 has been presented to give effect to the PCD divestiture as if it had occurred on March 31, 2008. The unaudited pro forma condensed consolidated statement of operations information for the year ended December 31, 2007 and the three months ended March 31, 2008 set forth below has been presented after giving effect to the divestiture as if it had occurred on January 1, 2007, and does not include the nonrecurring pro forma gain as a result of the disposition.

The operations and cash flows of the divested business will not be accounted for and presented as a discontinued operation because of expected significant continuing direct cash flows pursuant to a three year supply agreement with the newly formed entity.

The unaudited pro forma financial statement information has been derived primarily from the historical audited consolidated financial statements of the Company included in its Annual Report on Form 10-K for the year ended December 31, 2007 and unaudited consolidated financial statements of the Company included in its Quarterly Report on Form 10-Q for the three month period ended March 31, 2008. The unaudited pro forma financial statement information is based upon available information and assumptions that the Company believes are reasonable under the circumstances and were prepared to illustrate the estimated effects of the divestiture.

The unaudited pro forma financial statement information has been provided for informational purposes and should not be considered indicative of the financial condition or results of operations that would have been achieved had the divestiture occurred as of the periods presented. In addition, the unaudited pro forma financial statement information does not purport to indicate balance sheet data or results of operations as of any future date or for any future period. The unaudited pro forma financial statement information should be read in conjunction with the historical financial statements, including the notes thereto, of the Company included in its Annual Reports on Form 10-K for the year ended December 31, 2007 and Quarterly Report on Form 10-Q for the period ended March 31, 2008.

UTSTARCOM, INC.

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION (UNAUDITED)

AS OF MARCH 31, 2008

(in thousands)

				Business to		Pro Forma
	Historical			be Disposed (a)		Adjustments			Pro Forma
ASSETS
Current assets:
Cash and cash equivalents	$	298,482		$	—	$	214,506	(b)	$	512,988
Short-term investments	6,637			—					6,637
Accounts receivable, net	260,834			92,180					168,654
Other receivables	8,867			—		24,292		(b)	33,159
Inventories	521,794			145,518					376,276
Deferred tax assets	1,157			—					1,157
Prepaids and other current assets	141,694			51,467					90,227
Short-term restricted cash	13,749			—					13,749
Total current assets	1,253,214			289,165		238,798			1,202,847
PP&E, net	210,336			1,384					208,952
Long-term investments	15,671			—		1,600		(b)	17,271
Intangible assets, net	22,985			17,046					5,939
Long-term deferred costs	164,922			—					164,922
Long-term deferred tax assets	56,775			—		(2,891		)(g)	53,884
Other long-term assets	25,750			39					25,711
Total assets	$	1,749,653		$	307,634	$	237,507		$	1,679,526
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	214,263		$	78,635				$	135,628
Short-term debt	35,907			—					35,907
Income taxes payable	3,913			—		—			3,913
Customer advances	244,947			—					244,947
Deferred revenue	108,068			—					108,068
Deferred tax liabilities	49,687			—					49,687
Other current liabilities	221,088			39,577		9,769		(c)	191,280
Total current liabilities	877,873			118,212		9,769			769,430
Long-term deferred revenue	234,507								234,507
Long-term debt	267			267					—
Other long-term liabilities	19,979								19,979
Total liabilities	1,132,626			118,479		9,769			1,023,916
Minority interest in consolidated subsidiaries	806			—					806
Stockholders’ equity:
Net assets disposed of	—			188,264		188,264		(d)	—
Common stock	152			—					152
Additional paid-in capital	1,221,567			—					1,221,567
Accumulated deficit	(665,813		)	—		39,474		(d)	(626,339		)
Accumulated other comprehensive income	60,315			891					59,424
Total stockholders’ equity	616,221			189,155		227,738			654,804
Total liabilities, minority interest, stockholders’ equity	$	1,749,653		$	307,634	$	237,507		$	1,679,526

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Information

UTSTARCOM, INC.

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

(In thousands, except per share data)

	Year ended December 31, 2007
				Business to			Pro Forma
	Historical			be Disposed			Adjustments			Pro Forma
Net sales	2,466,970			1,664,147			—		(e)	802,823
Cost of net sales	2,145,519			1,569,932			—		(e)	575,587
Gross profit	321,451			94,215			—			227,236
Operating expenses:
Selling, general and administrative	314,874			29,458						285,416
Research and development	168,275			2,751						165,524
Amortization of intangible assets	15,961			6,161						9,800
Restructuring charges	14,474			—						14,474
Asset Impairment	19,912			—						19,912
Total net operating expenses	533,496			38,370			—			495,126
Operating (loss) income	(212,045		)	55,845			—			(267,890		)
Interest income	14,460			—						14,460
Interest expense	(32,676		)	(58		)				(32,618		)
Other income, net	64,796			73						64,723
(Loss) Income before taxes	(165,465		)	55,860			—			(221,325		)
Income tax expense	(32,898		)	—		(f)	—			(32,898		)
Minority interest in losses of consolidated subsidiaries	2,788			—						2,788
Net loss	$	(195,575	)	$	55,860		$	—		$	(251,435	)
Loss per share - Basic	$	(1.62	)							$	(2.08	)
Loss per share - Diluted	$	(1.62	)							$	(2.08	)
Weighted average shares used in per-share calculation:
- Basic	121,059									121,059
- Diluted	121,059									121,059

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Information

	Three months ended March 31, 2008
				Business to			Pro Forma
	Historical			be Disposed			Adjustments			Pro Forma
Net sales	585,989			430,724			—		(e)	155,265
Cost of net sales	493,910			397,888			—		(e)	96,022
Gross profit	92,079			32,836			—			59,243
Operating expenses:
Selling, general and administrative	79,744			7,751						71,993
Research and development	41,400			488						40,912
Amortization of intangible assets	1,824			1,262						562
Restructuring charges	—			—						—
Asset Impairment	—			—						—
Total net operating expenses	122,968			9,501			—			113,467
Operating (loss) income	(30,889		)	23,335			—			(54,224		)
Interest income	2,817			—						2,817
Interest expense	(6,071		)	(11		)				(6,060		)
Other income, net	53,970			451						53,519
Income (Loss) before taxes	19,827			23,775			—			(3,948		)
Income tax benefit	5,020			—		(f)	—			5,020
Minority interest in losses of consolidated subsidiaries	510			—						510
Net income	$	25,357		$	23,775		$	—		$	1,582
Loss per share - Basic	$	0.21								$	0.01
Loss per share - Diluted	$	0.21								$	0.01
Weighted average shares used in per-share calculation:
- Basic	122,096									122,096
- Diluted	123,098									123,098

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Information

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

a)To reflect the elimination of the assets sold and liabilities disposed of in connection with the divested business based on the balances recorded as of March 31, 2008.

b)To reflect consideration received from the sale of divested business for $214.5 million in cash proceeds, $24.3 million cash held in escrow, and $1.6 million in equity securities representing approximately a 2.5% ownership interest of the newly formed entity. The $24.3 million escrow is related to amounts for net working capital adjustments and potential indemnification contingencies. The purchase price was primarily based on the carrying value of the assets and liabilities transferred on July 1, 2008, subject to certain adjustments.

c)To reflect estimated transaction and other costs directly attributable to the divestiture.

d)To reflect the estimated pro forma gain, net of taxes, from the divestiture based on the carrying value of the assets and liabilities transferred on an assumed closing date of March 31, 2008 and will differ from the carrying value of the assets and liabilities transferred on July 1, 2008, the closing date.

e)Intercompany sales made by the Company to the divested business that previously were eliminated in the preparation of the Company’s consolidated financial results were approximately $235.1 million and $28.0 million in fiscal year 2007 and the first fiscal quarter of 2008, respectively.  The related cost of goods sold for the same periods were $221.1 million and $26.7 million, respectively. These amounts have been provided for informational purposes.  While the Company has entered into a supply agreement with the divested business, these amounts do not purport to indicate the future sales (and the related costs of goods sold) the Company will realize from this agreement.

f)As a result of the Company’s net operating losses in prior years and valuation allowances on the Company’s deferred tax assets, no income tax expense is attributable to the periods presented.

g)As a result of the sale of PCD, the Company is establishing a full valuation allowance on the Company’s deferred tax assets in Canada.