Sprint Nextel announced plans to lay off 4,000 workers, close 125 company-owned stores, and sever relations with 4,000 resellers. This news comes after losing 1.2 million subscribers in 2007.
The subscriber slump brings defections to 1.2 million in 2007, forcing Chief Executive Officer Daniel Hesse to get rid of about one-fifth of Sprint's retail locations. Hesse replaced Gary Forsee in December, taking charge of a company that has struggled to absorb the $36 billion purchase of Nextel in 2005 and offer phones to compete with Apple Inc.'s iPhone, sold by AT&T Inc.
"They've dug themselves a much deeper hole to climb out of,'' said Nelson, who is based in New York and advises investors to hang onto the shares.
Sprint, based in Reston, Virginia, fell $3.01 to $8.56 at 12:27 p.m. in New York Stock Exchange composite trading. Larger rivals AT&T and Verizon Communications Inc., the co-owner of Verizon Wireless, also each fell as much as 5 percent.
This action is expected to save the company $700 million to $800 million a year.
It is speculated that Sprint's shares will hit a five-year low when trading opens on Monday. Sprint is due to deliver its Q4 results on Feb 28, 2008.
So, what happens to WiMAX in all this?
Regardless of Wall Street's reaction, wireless industry consultant Andrew Seybold questioned the benefit of layoffs to Sprint Nextel. Even with its current headcount, the carrier is struggling to maintain its CDMA and iDEN networks while tackling two other major initiatives—the nationwide rebanding of 800 MHz spectrum and the initial deployments of WiMAX networks on 2.5 GHz spectrum.
"They took on too much … I think they've got to get back to basics," Seybold said. "I'm not sure that layoffs or anything helps until they get back to basics and their customers feel wanted again. They need to take care of business and stop the bleeding on the Nextel network."
Seybold said he believes Sprint Nextel's total costs associated with 800 MHz rebanding will significantly exceed the $2.8 billion the company was required to make available for the endeavor. Meanwhile, Seybold indicated the carrier may only deploy WiMAX enough to satisfy FCC buildout requirements to let the company keep its considerable 2.5 GHz spectrum.
It will be interesting to see what the next move will be. While the initial costs are high for WiMAX, the rewards could be great. Or do you agree that it's time for Sprint to abandon innovation, at least for the moment, and get back to taking care of business?