Saturday, January 19, 2008

Investors Run From Sprint

--Sprint Nextel Corp.'s shares plunged almost 25% as the wireless carrier reported worse-than-expected losses in cellphone subscribers and issued a gloomy outlook for 2008. --Sprint said it would streamline its operations to reflect slowing growth, beginning with 4,000 job cuts in the first half of the year, reductions in outside contractors and the closing of about 8% of its retail stores. The company, which recently hired telecom veteran Dan Hesse to succeed ousted Chief Executive Gary Forsee, expects the moves to save $700 million to $800 million on an annual basis. Sprint shares skidded $2.87 to $8.70 in 4 p.m. composite trading on the New York Stock Exchange. --net losses of 683,000 post-paid subscribers -- people who pay monthly bills and sign contracts -- and 202,000 pre-paid customers exceeded bearish Wall Street analysts' forecasts. --Many of Sprint's problems stem from its 2005 merger with Nextel Communications, which led to higher customer-service complaints and subscriber defections. The investment community will be looking to Mr. Hesse to provide more details on a turnaround plan during its Feb. 28 fourth-quarter earnings conference call. Besides addressing its core cellphone business, Mr. Hesse may provide hints of whether and how Sprint plans to follow through on its planned $5 billion capital investment in a new high-speed wireless network based on WiMax technology. --Beyond those issues is a more fundamental marketing problem. Sprint lacks a distinct identity. Verizon gets credit for a reliable and fast network, while AT&T has benefited hugely from its exclusive rollout of the Apple Inc. iPhone in the U.S. "Everyone knows [Sprint], but no one knows them for anything in particular," said Robert Passikoff, president of Brand Keys Inc., a consultancy that specializes in customer loyalty.

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