Through The Fly's Eyes: Sprint Nextel
from Joseph Lazzaro of Theflyonthewall.com
Sprint's Lackluster Performance
The ouster of Gary Forsee as CEO of Sprint Nextel (S) can hardly be placed in the category of sudden, shocking surprises.
Facing mounting pressure from investors, Sprint said Forsee will leave immediately and that CFO Paul Saleh will run the company on an interim basis.
Sprint has struggled to adroitly and profitably integrate Nextel - which it purchased for $36 billion - into its operation, and it's now clear that a new company advertising campaign to attract subscribers isn't working; Sprint said it lost 337,000 contract subscribers in Q3.
One may ask why hasn't Sprint's advertising plan produced better results? An ad campaign can not negate serious operational deficiencies - it's kind of like arguing you can build a house by not laying a sound foundation. Sprint's shares closed Tuesday down 22 cents to $18.28.
Sprints largest drawbacks? You guessed it: those dropped calls and poor cell phone reception. In fairness, Sprint's mobile network has improved recently but it still lags mobile systems operated by Verizon (VZ) and AT&T (T). Further, the broadband era has simply magnified the quality gap: Sprint will have to invest even more to make its system as media-friendly as its competitors': growth in video consumption on mobile phone shows few signs of slowing in the immediate years ahead, barring a recession.
The above will require innovation, belt-tightening, appropriate pricing decisions, and perseverance, among other virtues, and the consensus on Wall Street is that Sprint will have at most 3-4 quarters or so to show enduring, better results.
If you've concluded that the above is a better-than-modest hurdle, you're correct.