Sprint goes WiMax; Wall Street goes flat

There’s never a good time to tell investors that you plan to spend about $3 billion on a new technology platform, but it’s really bad timing after a sisappointing quarter. That’s the take-away from Sprint Nextel’s Aug. 8 announcement that it will build a WiMax network with help from Intel, Samsung and Motorola. While Sprint Nextel’s announcement was big news in technology circles, those following the money had mixed reviews.

Among the do’s and don’ts cited by observers:

• Do undertake a big effort with major players riding shotgun. Wall Street analysts said Intel, Motorola and Samsung are high-quality partners that can lend credibility to Sprint’s attempts to build a new network, dubbed 4G, for those following the industry. Why does Sprint need big names behind it? “Sprint is currently being criticized for failure to establish the quality of its network in consumers’ minds and poor handset selection,” said Jeffrey Halpern, an analyst at New York-based Sanford Bernstein, in a research report.
• Do tell industry watchers about how WiMax can leapfrog the competition. That’s no small issue given doubts that Sprint Nextel can hang tough with the likes of Verizon Wireless and Cingular Wireless.
• Don’t hype the impact of WiMax if you have a spotty track record. Halpern said it’s too early to tell if Sprint’s WiMax effort is the equivalent of its ION, which wiped out $3 billion in Sprint’s shareholder value between 1998 and 2001, or Nextel’s Direct Connect, which was a big enough hit to persuade Sprint to buy Nextel.
• Don’t pitch a new project when the house is burning. The biggest knock on Sprint Nextel’s WiMax announcement is that the company has other issues churn, declining revenue per subscriber, declining gross additions, poor marketing, inferior handsets, and uncertain network integration between Sprint and Nextel to worry about, said Halpern. “Our sense, right or wrong, is that investors would prefer to see management focus on any one (or all) of these issues rather than promoting new services based on unproven technologies that may be available in 2008,” said Halpern.