Sprint Nextel Announces Plan to Lay Off 5,000 Workers
Washington Post Staff Writers
Tuesday, January 9, 2007; Page D03
Sprint Nextel, still losing cellphone customers despite changes in management and operations, plans to lay off about 5,000 employees in the coming months, executives announced yesterday.
The Reston-based company suffered a net loss of about 300,000 wireless subscribers in the last quarter of 2006, said company officials, who projected lower sales for 2007 than analysts had anticipated. Most of the planned layoffs will be completed by early April, they said, and will be spread throughout the company.
Sprint, the nation's third-largest wireless carrier, has about 64,600 employees. About 5,000 are in Reston, and more than 14,000 are in Kansas City.
Sprint and Nextel Communications merged in 2005 with the hope that the two wireless companies would become a vibrant force offering attractive new products and services. But the firm has struggled to manage its networks, and customers have increasingly turned to such rivals as Cingular and Verizon Wireless.
Sprint's chief executive, Gary D. Forsee, who replaced Timothy Donahue as company chairman last year, told investment analysts and reporters in a conference call yesterday that Sprint Nextel ended 2006 "in a solid financial position." In a company statement, he called 2006 "a challenging year," adding that "we initiated actions to improve our operating performance."
But Christopher King, senior analyst with the investment banking firm Stifel, Nicolaus & Co., said the company would have to convince investors that its efforts to cut costs and improve services will end its slide. "Things certainly aren't going well," King said in an interview. "In my mind it's very much a show-me story. We'll need to see some stabilization, and we haven't seen that yet."
The layoffs will include all departments, with about 20 percent coming from executive ranks, said Sara Krueger, a Sprint spokeswoman. Managers will begin discussing the changes with employees as more decisions are made, she said.
"Our strategy has been the same -- to get back on the growth trajectory," Krueger said. The "cuts and investments may reduce growth in 2007," she said, but "should improve growth by 2008."
The company also said it plans to eliminate 300 retail stores and kiosks as well as 1 million square feet of leased space by the end of the year. Last year it relinquished 2 million square feet of office space.
Sprint Nextel's multibillion-dollar effort to upgrade its networks continues this year, including $7.1 billion for its core wireless networks, $600 million for its Internet services, and $800 million for WiMax, a high-speed wireless broadband network. The company is in the process of combining Nextel's "push-to-talk" technology, which continues to lose subscribers, with Sprint's wireless network. Last month, Sprint released a hybrid phone compatible with both networks.
As traditional telephone subscribers continue to drop off, Forsee said Sprint will focus on Internet-based products and partnerships with cable providers. He said that 30 million U.S. households now have access to cable and Internet telephone services and that Sprint hopes to double its 1.5 million customers this year.
"We're beginning to see operational progress and incremental productivity," he said in the conference call. "We are close to reaching economic returns on invested capital."
