Sprint’s Stock Gets Crushed

Oct 7, 2011
J. Webster
Comments Off on Sprint’s Stock Gets Crushed

Sprint’s chief financial officer said it may raise additional capital for refinancing and won’t provide an update on its fourth-quarter or full-year earnings, the stock was crushed. How bad? Try going down almost 18%. Sprint is the is the third largest wireless carrier in the U.S. but hasn’t made a profit since 2006 and is losing subscribers.

What’s crazy though is the stock was up nearly 10% earlier today, so that’s almost a 30% swing. It’s gone from $3.39 a share to a low of $2.25. And Sprint’s stock has whipsawed back and forth this whole week, shooting lower after it’s agreement with Apple was announced for the iPhone, where Sprint is on the hook for over $20 billion dollars. One person calling the move a bet the whole company type of play:

Sprint Chief Executive Dan Hesse told Sprint’s board in August that the carrier would have to agree to purchase the iPhones over the next four years—a commitment of $20 billion at current rates—whether or not it could find people to buy them, according to people familiar with the matter.

Directors debated what they had just heard. Some worried the payoff would be too long in coming. One member questioned whether the multiyear deal might outlast the iPhone’s popularity. To sell that many iPhones, Sprint would have to double its rolls of contract customers, convert all of them to the Apple device or a combination of the two.

“This is a bet-the-company kind of thing,” said a person familiar with Sprint’s decision making. The projected hit to the company’s operating income is “staggering,” the person said.


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