UTStarcom, an equipment maker whose trajectory of fortunes resemble that of a bouncing ball, today announced that it was getting out of the handset business altogether. It stopped making handsets a while ago, but today it said it was spinning off its personal communications division, “selling the handset distribution business to Personal Communications Devices Holdings, a newly formed entity controlled by AIG Investments.” It will get about $240 million for the unit, with a $50 million earn-out option.
The move shows that the handset business — be it manufacturing, distribution or sales — continues to be a money-losing proposition for me-too players whose core competency is not mobile. UTStarcom was known for its broadband access business, and it expanded into too many categories hoping to grow big, real fast. Its report card is at best a C-minus thus far. Don’t believe me — check out their 5-year stock performance.
The thing about UTStarcom is that they grow by buying other companies’ product lines. I believe most of their handset line came from Audiovox. Basically, they are trying to follow the Cisco model and proving that they don’t have whatever secret sauce it is that Cisco has.
The core competency of UTStarcom has never been mobile before they jumped into this race. Right froim the start, company couldn’t do the way it should have. So getting out of OEM race is not a new news.