Thursday, February 28, 2008

Huge writedown slams Sprint

Sprint (S) is admitting defeat in its 2005 merger with Nextel. The struggling telco posted a fourth-quarter loss of $29.5 billion, or $10.36 a share, reversing the year-ago profit of $261 million, or 9 cents a share. The latest quarter was hit by a $29.7 billion writedown of merger-related goodwill, reflecting the difference between the price Sprint paid and the actual value of the assests purchased. Excluding that gargantuan charge, Sprint made 21 cents a share on an adjusted basis, beating the 18-cent analyst consensus estimate. Revenue fell 6% from a year ago to $9.8 billion, missing the $9.95 billion Wall Street target.
"The fourth quarter financial results reflect the challenges facing our wireless business," said CEO Dan Hesse, who took over late last year for Gary Forsee. Adjusted operating income at the wireless business plunged to $168 million from $652 million a year earlier, as Sprint continued to lose customers, pressuring service revenue. Fortune's Michal Lev-Ram and Scott Moritz reported Wednesday that Sprint is having more and more trouble holding onto lucrative wireless postpaid users. In the fourth quarter, the company said, total post-paid subscribers declined by 683,000.
In response, Hesse said Sprint is taking steps to bolster its financial flexibility, by saying it won't declare any dividends in the forseeable future and letting its $6 billion stock buyback plan expire.

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