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Gary Forsee posts

Why didn't Sprint and Nextel ever really merge?

Posted Nov 27th 2007 12:34PM by Brian White (RSS feed)
Filed under: Deals, Bad News, Sprint Nextel Corp (S)

When Sprint (NYSE: S) merged with Nextel Corp. in 2005, more than a few wireless industry eyebrows were raised. After all, the combination of then-Cingular and BellSouth was sitting on the horizon and Sprint was most likely desperate to not get left behind. At the time, Verizon Wireless was the largest wireless provider in the U.S. and the newly-combined Cingular/BellSouth venture was poised to raise those stakes. What was Sprint to do? Merge with a company itself.

The problem that would become apparently to everyone except boardroom ninnies was the technical incompatibility of the Sprint and Nextel wireless networks. Is it really economically feasible to operate two overlapping national wireless networks, even if the combined company were to see a combined customer (and revenue) count? That was the promise. It failed, and failed miserably.

Continue reading Why didn't Sprint and Nextel ever really merge?

Sprint CEO Gary Forsee resigns: Under pressure

Posted Oct 8th 2007 6:11PM by Sarah Gilbert (RSS feed)
Filed under: Bad News, Management, Sprint Nextel Corp (S)

sprint ceo gary forsee It can't be a good thing when a CEO resigns without even the pretense of "spending more time with his family." Sprint-Nextel Corporation (NYSE: S) CEO Gary Forsee has been the focus of investor and analyst anger for some time now; on Friday, the Wall Street Journal reported Sprint management was searching for his replacement and recently, he was targeted by activist investor Ralph Whitworth. In September, Eric Buscemi wondered if his time had run out thanks to his Failure to Turnaround. A whole year following the company's purchase of Nextel, integration was still questionable and EBITDA was forecasted to be billions lower than expected.

According to a statement from Sprint, CFO Paul Saleh will serve as interim CEO while the board finds (finishes finding?) a new CEO. Interestingly, Sprint says it is targeting candidates outside the company. And in what seems to be a "might as well dish all our dirt at once" move, Sprint said it was forecasting a third-quarter net loss of 337,000 post-paid subscribers (the ones who have annual contracts and pay their bills each month).

The news was already cheering up investors; after a nasty drop of 51 cents, or 2.68%, to $18.50 on the day, the stock was up in after-hours trading to $19.05; erasing all the day's losses and then some. The company's stock is near a two-year low.

Newspaper wrap-up: Sprint looking to replace its CEO

Posted Oct 5th 2007 9:05AM by Eric Buscemi (RSS feed)
Filed under: Newspapers, Magazines, Sprint Nextel Corp (S), Sotheby's (BID),

MAJOR PAPERS:

Troubled Sprint Nextel Corporation (NYSE: S) is searching for a replacement for CEO Gary Forsee, and expects to have a new person in place by December, reported the Wall Street Journal.
Two Bear Stearns Companies (NYSE: BSC) collapsed mortgage related hedge funds, that lost $1.6B, have drawn an investigation from the U.S. attorney in Brooklyn, NY, reported the Wall Street Journal.
The Financial Times reported that the U.K. economy will be affected by the global credit crisis, according to Chancellor of the exchequer Alistair Darling, who said that while the U.K. economy is in a strong position to ride out the impact, growth projections will be lowered from the current 2.5%-3%.

OTHER PAPERS:

From BusinessWeek's "Inside Wall Street" section:

Sotheby's (NYSE: BID) has benefited from Wall Street's equity market gains, with high-end investors piling money into art, and Rommel Dionisio of Wedbush Morgan Securities sees the stock going to $60 in a year.
Amid concern that it might miss the Street's Q3 forecast, is Polycom (NYSE: PLCM) oversold at $26? Yes, says Greg MacArthur, president of investment outfit Viewpoint2000.
Stereotaxis (NASDAQ: STXS) makes a computerized magnetically controlled navigation system that guides devices used in minimally invasive cardiac arrhythmia surgery, and Standard & Poor's rates the stock a Buy, in part because of its order backlog of $55 million.

Sprint's Gary Forsee seeing more pressure

Posted Oct 4th 2007 8:15AM by Eric Buscemi (RSS feed)
Filed under: Management, Insiders, AT and T (T), Sprint Nextel Corp (S), Verizon Communications (VZ)

Activist investor Ralph Whitworth of Relational Investors is increasing the heat on Sprint-Nextel Corporation (NYSE: S).

As we have been blogging for a while, Sprint Nextel CEO Gary Forsee's plan to turn the wireless service provider around has not worked. Forsee, a year following its merger with Nextel, targeted EBITDA of around $20 billion, however, now sees 2007 EBITDA of around $11.3 billion. And this is in an industry where the number of competitors has decreased.

The results of Whitworth's activist-shareholder efforts have been somewhat mixed. His most high-profile effort, forcing change to Home Depot Inc's (NYSE: HD) management and board, has yet to prove rewarding for shareholders, as Home Depot's price is down since he took his activist stance.

What will Whitworth do? Hopefully, he will force Forsee out and force the sale of the company to Verizon Communications (NYSE: VZ). AT&T (NYSE: T), which has combined the Cingular and AT&T Wireless businesses, is a huge competitor and is being well-managed. Sprint has fallen way behind its competitors and some serious changes are needed.

Has Sprint's (S) Gary Forsee's time run out?

Posted Sep 14th 2007 9:30AM by Eric Buscemi (RSS feed)
Filed under: Analyst Reports, Analyst Upgrades and Downgrades, Management, AT and T (T), Sprint Nextel Corp (S), Verizon Communications (VZ)

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.

Continue reading Has Sprint's (S) Gary Forsee's time run out?

Sprint fundamentals improving

Posted May 3rd 2007 12:20PM by Eric Buscemi (RSS feed)
Filed under: Earnings Reports, Sprint Nextel Corp (S)

After being evasive for quite some time with the investment community, Sprint's management, for the third consecutive quarter, comes clean.

We blogged for quite some time that Sprint Nextel Corporation (NYSE: S) CEO, Gary Forsee, was in denial regarding the speed at which he was moving with the integration of Nextel. Sprint was substantially underspending to upgrade its IT infrastructure, shut down stores and retrain people. Sprint also was too slow at introducing new handsets to the very fashion conscious wireless user market.

However, since announcing substantial changes in 2006, Sprint appears to be sticking with its initial restructuring plans and then some. Benefits of the plan are expected to be seen in the second quarter of 2007. Higher ARPU, better price performance at Boost, lower churn and involuntary churn, and greater focusing on prime customers should drive improved results.

Sprint has finally come in-line with industry handset price subsidiaries and going forward should see subsidiaries have less of a negative impact on results. Also, Sprint should benefit from cost savings due to higher IT spending for new billing systems with all customers being placed on single payment platform by year-end and the upgrading of its point of sale systems. Also, the payroll and human resources platform conversion should be completed this year.

The company has moved to close 150 stories and it is outsourcing more kiosks.

All these improvements will translate into an improvement in sequential EBITDA, which should be followed by a sustained period of EBITDA improvement.

Other positives include debt being only 1.9x EBITDA--very conservative--and the wireless partnership with cable companies should begin a serious ramp in 2008.

With Sprint management coming clean once again and with sustainable sequential EBITDA improvement expected for the remainder of 2007, at least, it looks to me like it is time for Sprint to become a must-own stock again.

Sprint Nextel sees $211 million loss for Q1

Posted May 2nd 2007 11:32AM by Brian White (RSS feed)
Filed under: Earnings Reports, AT and T (T), Sprint Nextel Corp (S), Verizon Communications (VZ)

Sprint Nextel Corp. (NYSE: S) just continues to have one bad news release after another. The third-largest wireless carrier in the U.S. reported a dismal Q1 period, as a $211 million loss was posted amid large investments in operations that erased modest sales gains. At the same time, Sprint lost "high-quality subscribers" to the competition as problems with the Nextel side of the business continued.

Since Sprint acquired Nextel in 2005, the two businesses have not been integrated successfully. Before the merger, the ARPU (average revenue per user) for Nextel wireless subscribers was the highest in the entire U.S. wireless industry. After the merger, apparently Sprint did not take the steps needed to keep Nextel subscribers happy, the Nextel network deteriorated and massive defections resulted.

Sprint's loss of $211 million came to 7 cents per share, versus a profit available to common shareholders of $417 million, or 14 cents per share, a year ago. Q1 revenues were $10.1 billion (up from $10.07 billion a year ago), but CEO Gary Forsee stated that Sprint had spent a lot of money during the quarter trying to alleviate technological and signal problems that have driven away customers from its press-to-talk service.

Is it too little, too late to salvage the loyal Nextel subscriber? Possibly. If that ends up being the case, the incompetence Sprint management displayed after the Nextel acquisition should cause some heads to roll. I'm surprised it hasn't happened already, to be honest. The two leading wireless carriers in the U.S., Cingular Wireless (now AT&T Inc. (NYSE: T)) and Verizon Wireless (Verizon Communications (NYSE: VZ)), have benefited from Sprint's missteps in a huge way.

Sprint's management on borrowed time

Posted Jan 9th 2007 9:46AM by Eric Buscemi (RSS feed)
Filed under: Earnings Reports, Forecasts, Bad News, Management, Sprint Nextel Corp (S)

Last night, Sprint-Nextel (NYSE: S) warned that it was going to miss revenue and earnings targets, which should come as no surprise to anyone.

The market for wireless phones has been maturing and Sprint's management has not been very innovative to compete in this business.

Sprint has not done a good job at managing Nextel and appears to have not invested enough in the network infrastructure in this business, a subject I have blogged about in the past. An example of this is the poor job management has done trying to move Nextel customers to a new platform.

Gary Forsee is very much on borrowed time. Forsee, the long-time right-hand man for Bill Esrey, has still not demonstrated the ability to lead a company, having had a tough time since taking the CEO position in March of 2003. This year is more than likely the last chance for him to fix this broken company.