Zeev - you can't generalize like that
UTSI isn't selling into the U.S. market. And the drop in GMs isn't because of falling ASPs in their telecom equipment, but rather (a) because they acquired Audiovox's handset division and handsets carry dramatically lower margins than their pre-existing product line, (b) coupled with vicious handset competition in their primary market - China, and (c) the fact that until they could switch Audiovox's handset manufacturing to their own lower cost facilities, they'd be squeezed, and (d) because they were forced to carry forward a large sale to a Japanese carrier with significantly higher margin, into this quarter rather than booking last quarter (that single sale alone was worth a full point on GMs).
What happen if sales start to drop? The better question would be to ask what happens if their sales don't grow at the guided rate. These guys are growing sales like a weed.
If you take time to listen to their presentation at the most recent investor conference(s) you will find that the uncertainty about GMs is falling and the confidence in sales meeting guidance is rising. The mix shift in China vs. non-China sales is similarly on track to move faster than projections -- bringing with it, additional positive impact on margins (as non-China margins are higher).
For now, and perhaps another quarter or even two, fear will abound. And I wouldn't count on their supply chain improvements to be fully realized in just this single quarter.
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