Failed Acquisition - Sprint - Nextel

Sprint CEO Out


excerpted from Washington Post:


Sprint Nextel said yesterday that chairman and chief executive Gary D. Forsee will step down immediately, just two years after directing the $35 billion merger that created the nation's third-largest wireless company.

The board was unhappy with Sprint's recent performance. Sprint warned yesterday that it expects to lose another 337,000 monthly customers in the current quarter and lowered its annual revenue expectations.



Forsee's main job was to parlay the merger into a telecom powerhouse while charting a lucrative path in the growing and intensely competitive wireless industry. But he failed to accomplish those goals in the view of Wall Street and the company's board of directors.
[...]
Now his departure leaves the Reston company at a difficult crossroads. The merger pitched two years ago as a combination of complementary companies has fallen flat, leaving engineering problems with the new network in its wake, sending its stock in a downward spiral and its customers fleeing to larger rivals.

Forsee, who has described himself as a leader capable of executing plans, has come under fire for failing to bridge the cultural and technical gaps between the two companies and forging a solid financial course for Sprint. As the company tried to phase out the Nextel network, consumers experienced dropped calls and a smaller coverage area.

Other wireless companies grew by emphasizing superior networks or better value, while Sprint's advertising campaign failed to establish its place in the market. With more than 80 percent of the U.S. population carrying a cellphone, wireless carriers are ruthlessly competing for one another's customers.

"Sprint's not starting with a clean slate, but it will at least be able to reset expectations now that Forsee is gone," said Michael Nelson, an equity analyst with the Stanford Group. "Of all the wireless carriers, Sprint is the only one that still hasn't found its identity."
[...]
Some analysts and business school professors cite the marriage of Sprint and Nextel as a case study of a poorly conceived merger. Their wireless networks were largely incompatible, and the companies' cultures were worlds apart. Sprint was more than a century old and had a legacy in the local and long-distance telephone business. Nextel was barely a decade old, a scrappy up-and-comer that had cobbled together its network out of cab companies' walkie-talkie licenses. Sprint's strength in the wireless business came from its appeal to consumers; more than 90 percent of Nextel's customer base came from the blue-collar workforce. The companies' headquarters were also separated by half a continent, and more than half of the company's workforce remains in Overland Park, Kan., where Sprint had been based.

One of Forsee's most controversial moves was to commit $5 billion to building a new high-speed wireless network using a new technology called WiMax, which he promised would be up to five times faster than current cellular networks. He forged partnerships with start-up Clearwire to construct the network; with Google to search on the network; and with Motorola, Samsung and Nokia to build cutting edge-devices to roam on the network.

But he wanted to use WiMax technology, which met heavy skepticism from analysts because it is largely untested. The build-out has already hit delays.

Forsee tried to calm impatient investors by unveiling new cellphones, improving customer service, working with cable companies and revamping the company's marketing campaign. But he ran out of time by late summer, when the board scrapped the search for the No. 2 position and started looking for a replacement for the top job.

"Forsee will be blamed for a failed acquisition, but I don't believe he will be the last to exit," said Ben Abramovitz, senior analyst at ICAP Equity Research. "One man can't be blamed for all the issues Sprint currently has."

http://soonerthought.blogspot.com/2007/10/sprint-ceo-out.html

http://www.washingtonpost.com/wp-dyn/content/article/2007/10/08/AR2007100801117.html?wpisrc=newsletter&sid=ST2007100801847