Sprint Nextel Corp. (S)
Sprint Nextel Corp (S) is a tricky company to judge. Although the company has a bunch of problems right now, it is doing some positive things to steer itself into the right direction. It is a company with solid potential, but it would be nothing short of a speculative investment right now.
Sprint, which is currently the number 3 mobile service provider in the United States, has been stuck in a rough patch for a while. The company is currently trading at $2.40 per share, more than 75% lower than its 52-week high of $10.36. It also just recently announced that it would cut up to 8,000 jobs (14% of its workforce) by March 2009 in order to reduce costs by $1.2 billion. While the company had $4.1 billion of cash at the end of the 3rd quarter 2008, Sprint owes $600 million of debt in May 2009 and $2.4 billion in 2010. When you consider that Sprint has a negative earnings per share of $-10.75 and a ton of debt due soon, it is clear to see that its cash situation is becoming dangerous.
Another factor that is absolutely killing Sprint is that its competitors are stealing its customers. Sprint, which provides wireless service to only about 10% of Americans, has lost a ton of customers to both AT&T (T) and Verizon (VZ). Although we will not know exactly how many customers Sprint lost in the 4th quarter until it comes out with results on February 19th, it is estimated that Sprint lost 1.1 million to 1.3 million wireless customers. It is clear that many of Sprint’s customers are going to either Verizon or AT&T, as AT&T recently reported that about 40% of its new iPhone users in the 4th quarter came from outside AT&T.
While all of this news might sound horrible (which it is), Sprint is doing a lot of things right to turn things around and start becoming more competitive again.
The company has started to put an emphasis on customer satisfaction in order to begin rebuilding its image and to change the perception of the company. Beginning in 2008, CEO Daniel Hesse made it clear that improved customer satisfaction would be the number one priority for Sprint. Since then, the company has greatly improved its customer service, it has improved its call quality by upgrading its network, and it has also received higher customer satisfaction ratings for service and repairs. Improving customer satisfaction will definitely help the company’s image in the long run, and an improved reputation could potentially bring in new customers for Sprint.
Sprint also recently launched one of the cheapest service plans ever. The new wireless plan charges $50 a month for unlimited voice, texting, web access, and push-to-talk services. While the new plan will definitely hurt Sprint’s profit margins, at least it will keep some more customers from switching over to Verizon and AT&T. The plan is so cheap that it will undoubtedly convince some people to switch over to Sprint as well.
The third positive for Sprint is its partnership with Palm (PALM) for the company’s new phone, the Palm Pre. Sprint will be the exclusive provider for the much-anticipated Pre, which is expected to be sold to the public in May. I have heard a lot of positive reviews about the Pre, and this is great news for Sprint. If the Pre is a hit in stores, as many expect it to be, Sprint will clearly benefit as a result of being the exclusive service provider for the phone. I think this partnership with Palm is the positive factor that gives Sprint’s stock price the biggest upside potential.
So, while Sprint is currently experiencing continuous profit losses, massive amounts of debt, and huge layoffs, the future does look brighter. The company is working out its problems, slowly but surely. Having said this, I am not a buyer of Sprint right now, because I think it will be a while before the company becomes competitive again. But, at some point in the future when it pulls itself out of its current situation, I will definitely be more interested in purchasing some stock in Sprint.
Niki Pezeshki
College Trillionaire
Posts
Sprint Nextel has lost most of its' subscribers due to the fact that they do not provide substantial customer service, and do not cater to all crowds. This is all changing recently (as of Q1 2009). If you look closely, you will see that slowly Sprint has been trying to bring back their customers who switched to other carriers by offering them discounted plans and phones, but they still face the problem that they are a discount carrier and discount carriers do not get all of the advantages of a "Retail-Priced" carrier such as Verizon or AT&T. Sprint has been trying to regain its' reputation as a wireless company not only for businesses, but also for your average consumer. They are not doing such a great job, because they aren't releasing phones within the correct timeframe (BlackBerry Bold released for AT&T in November, BlackBerry Storm released for Verizon in November) but they try to make their versions of phones which they think can compete with others. The Palm Pre was made to compete with the Apple iPhone, but looking at the revenue the iPhone has brought Apple and AT&T since its' initial release (Easily over 60 Billion dollars) and this will be difficult for Sprint to compete with. I just think that if Sprint Nextel wanted to improve the overall company, they could do so not by cutting jobs, but by beginning with improving their customer service dramatically, then releasing phones which actually appeal to people, rather than a mock up version which does things similar but not like the original product it copies.
ReplyDelete