Question-and-Answer Session
Operator
(Operator's Instructions) Our first question is from the line of Steven Koffler from Khan Real.
Steven Koffler - Khan Real
Hello. A couple of questions here, if I could I'd like to focus on gross margins a little bit. Did I hear, Viraj, correctly, that the pro forma gross margin did not exclude $5 million roughly in inventory write-down in handsets?
Viraj. J. Patel
That's right. Because the pro forma table present only excludes the Korea and the PCD business.
Steven Koffler - Khan Real
All right. So that $5 million write-down that was excluded or — this is confusing, I’m sorry, but it was not excluded — that relates to ongoing handset business?
Viraj. J. Patel
In China, that' exactly right, Steven.
Steven Koffler - Khan Real
All right. Then one could easily make the argument that could be excluded. So if we added that back just roughly speaking we would take 5 million divided by roughly 80 million in revenue and add back about six points plus in gross margin? Am I thinking about this correctly?
Viraj. J. Patel
Yes.
Steven Koffler - Khan Real
Okay. So if you think about it that way, gross margin was something closer to 20%.
Viraj. J. Patel
That's correct. That's right.
Steven Koffler - Khan Real
Okay. I just wanted to make sure I understood that. Now then onto the segments, I mean clearly what's going on with the IP related is great, broadband gross margins at 5% — I forget exactly the breakdown, but I remember from year's past, UTStarcom was competing pretty aggressively against Wawe and others in China for DSL lines. And that's never been a price supportive business, shall we say. I mean is that still a big part of what you're doing in that area and is that the reason or part of the reason for the gross margin?
Peter Blackmore
The main reason was low volume of revenues in broadband. We are being very careful when we target the China business. We've targeted a lot of GEPON that have been specific about which provinces we go into to get a better margin position, but you're right, the China broadband business will always be competitive.
Steven Koffler - Khan Real
I mean what's the capability of bringing these up to something like the corporate average, and what was the amount of revenue in this area again, I forgot?
- To read the full transcript on Seeking Alpha, click here »
