Yesterday, Sprint Nextel Corporation's (NYSE: S) estimates were cut by Bear Stearns as channel checks turned up some rotten fruit. Bear sees little improvement in churn and lowered net subscriber additions. Cowen & Company did the same this morning.
The plans Sprint Nextel CEO Gary Forsee put in place in late 2006 to turn this sinking ship around are failing to produce positive results. Forsee, a year following the merger with Nextel, targeted EBITDA of around $20 billion as a possibility for the combined company. Analysts forecast 2007 EBITDA of just $11.3 billion. In an industry where the number of competitors has decreased with less competition, Sprint's performance has gotten worse.Despite the difficulties integrating two different wireless technology platforms, the problems appear to go way beyond that. The Nextel integration was never handled well, with Sprint management being unable to take control of the hard charging environment at the walkie-talkie service provider. Nextel's aggressive sales and marketing approach needed a quick overhaul when the merger was first completed, which was too slow to arrive.
Further, Forsee should have bitten the bullet much earlier and invested massively in upgrading its back-office infrastructure soon after the transaction was completed. Having to re-visit the local Sprint store to put the kids on the family plan, the same problems encountered two years ago, continue to plague them today -- computer systems that simply are unable to serve customers in a timely basis.
Sprint also never got the marketing plan right with its interesting choice of bright yellow to attract subscribers. Add to this its partnership with the cable companies to sell wireless service is slow coming to market, and you have a company that is shrinking instead of growing.
The simple fact of the matter is this company is in some serious trouble and needs some new leadership. The one positive point is that it only has $22 billion in debt versus $11 billion in EBITDA, not a lot of debt.
Maybe Verizon Communications Inc (NYSE: VZ) can save Sprint shareholders. Verizon, this is your calling card. If regulators let Cingular and AT&T Inc (NYSE: T) Wireless merge, they should permit you to buy Sprint. Please come in and pay $30 per share and get us Sprint shareholders out of our misery.
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Reader Comments (Page 1 of 1)
9-15-2007 @ 1:02AM
Murray said...
Seems funny that the writer Buscemi mentioned Merrill's downgrade of Intel without mentioning S&P's giving Intel it's 5 star rating and calling it their best buy.
Also, Merrill's downgrade was a joke. the analyst downgraded the stock but kept his $32 price projection. In addition if Mr Buscemi would check he will see that Merrill has a big position in AMD in one of their Mutual funds.
IS THIS WHAT THEY USED TO CALL YELLOW JOURNALISM?