http://online.wsj.com/article/AP08f5c47d6ca24fc5a65ea25e0b2b5b16.html?KEYWORDS=sprint
What Sprint has done in the last few years has been enormous. The company and Dan Hesse have gone from zero to hero. Unfortunately, Wall Street has failed to recognize Sprint’s success. Analysts’ expectations aside, from a turnaround and restructuring perspective, Dan Hesse has done a solid job.
This year, Sprint will need to focus on the smartphone and tablet markets even more than last year. Sprint will also need to focus on leveraging its strategic relationships, which may mean leveraging multiple technologies in a way that requires joint venture relationships. The key behind Sprint’s continued success is its ability to predict and adapt.
Frankly, Sprint has met what I call the minimal criteria for declaring success. According to stockbrokers, Sprint’s earnings are not as high as they would like and some frequently criticize the cash flow approach to analyzing companies. If you use earnings as the ruler, then you might state that Sprint is still in trouble and the turnaround is not successful. However, I would disagree and my reasons lie at the heart of my view why Sprint is poised for growth.
Like Hesse, I believe that Sprint can achieve more and will. The key behind Dan Hesse’s efforts is his ability to focus on the carrier’s fundamentals, understand the company’s strengths, and the company’s cash flow, while simultaneously dealing with Wall Street analysts who are demanding quick bumps in the stock’s price and unrealistic transactions. Remember a stockbroker makes money buying and selling an investor’s stock; it is what I call the “we get’em on the way in and on the way out” way of doing business. From Hesse’s perspective, he has to say the turnaround is not over because he needs to marshal all of the carrier’s resources to moving the company to the next level.
Turning around a company is an art and a science. It is a profession, which requires not just book smarts but also experience running companies. Some turnarounds are deemed successful simply because the company has achieved financial and operational stability. Hesse has had to deal with the 3 things that turnaround professionals must deal: financial restructuring, operational restructuring, and behavioral rehabilitation. When Dan Hesse stepped into the CEO job he had major troubles in all three areas. By the way, this is one of the reasons why most investment bankers simply walk away from troubled companies; it is too much trouble to fix broken companies.
So far, Dan Hesse and Sprint have accomplished the following:
• The carrier has achieved positive cash flow • The carrier has refocused and transformed its business • The carrier has restructured itself in three areas, management, financial, and operations • The carrier has a coherent business plan and revenue model • The carrier has a coherent vision for itself
These are all positive steps and represent a company that is ready for the next step – growth.
Can Sprint and Hesse do it? I have confidence in them. Competition in the marketplace is good for the consumer and hence having Sprint around is good for the consumer.
Investors need to focus on Sprint’s plans for 2011 and 2012 to gain a better understanding of the company.