Sprint says CEO steps down
NEW YORK (Reuters) - Sprint Nextel Corp (S.N) Chief Executive Gary Forsee stepped down on Monday as the company lowered its annual outlook, bowing to investor pressure amid heavy customer losses.
Shares of the No. 3 U.S. wireless service provider rose 2.7 percent to $19 in extended trading.
The move came after an activist investor last week demanded change and media reports said Sprint's board was quietly looking for a new leader.
"This is a major positive catalyst for Sprint. It's good to know the board isn't asleep at the wheel," said Patrick Comack, an analyst at Zachary Investment Research.
Sprint, which has struggled to position itself against bigger rivals AT&T Inc (T.N) and Verizon Wireless, said its board believed it was time to "put in place new leadership to move the company forward in improving its performance."
It said it would focus its search on candidates outside the company and appointed Chief Financial Officer Paul Saleh as acting CEO.
Analysts have said the company needs new blood to cope with customer defections stemming from technical problems, and, more recently, the launch of Apple Inc's (AAPL.O) iPhone.
Sprint said it expected 2007 consolidated operating revenue and operating income before depreciation, amortization, restructuring and asset impairments, and special items (adjusted OIBDA) to be slightly lower than previously forecast.
Sprint had estimated 2007 adjusted OIBDA at $11.0 billion to $11.5 billion and consolidated operating revenue at $41 billion to $42 billion. Analysts on average were looking for revenue of $40.9 billion, according to Reuters Estimates.
Sprint also said it expected to report a net loss of around 337,000 post-paid subscribers, who pay monthly bills, in the third quarter. Three analysts had forecast losses of 100,000 to 300,000 post-paid subscribers, considered a lucrative and more committed customer segment.
Sprint had added 16,000 post-paid subscribers in the second quarter after three quarters of losses. It had warned that the rebound could be short-lived as it expected customer cancellations to increase in the third quarter.
Sprint is due to release third quarter results on November 1.
Despite the lowered outlook, analysts viewed the announcement favorably and said Sprint needed a new strategy.
"I think investors have become increasingly frustrated with the poor performance over the past couple of years since the merger with Nextel, and I think many investors have lost confidence in management's ability to turn the company around," said Stanford Group analyst Michael Nelson.
Some investors had also been critical of Sprint's plan to spend up to $5 billion on WiMax by 2010. The high-speed, wireless technology could provide long-term growth, but it is still largely unproven.
Zachary's Comack said Sprint should defer initiatives like WiMax, saying that would increase Sprint's free cash flow.
(Additional reporting by Robert MacMillan and Yinka Adegoke)
