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Sprint Nextel's Chief Resigns
Gary Forsee's resignation leaves Sprint Nextel at a tough crossroads with its new network facing problems, shares slumping and subscribers fleeing.
(By Mark Lennihan -- Associated Press)
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Whereas Nextel targeted business customers bound by contracts, Sprint had a bigger base of subscribers with poor credit and unsuccessfully tried to transfer customers from the strained Nextel network to its own. Millions of customers defected to rivals AT&T and Verizon Wireless.
Initially, the company cast the merger as financially sound, promising some $14.5 billion in savings through 2008. But combining operations has cost far more than either company projected. During the first six months of the year, two full years after Sprint and Nextel combined, the company attributed $262 million as merger expenses. It further warned that the merger "could prevent or delay our realization of the cost savings and other benefits we expect to achieve as a result of those integration efforts."
Sprint's share price has fallen 21.7 percent since the merger, closing down 51 cents yesterday at $18.50 a share.
Forsee, 57, who has led Sprint since 2003, has been assailed by analysts and investors since engineering the purchase of Nextel in 2005. An engineer by training, he worked for or sat on the boards of Sprint, BellSouth, Cingular, AT&T and Global One, a failed international telecom of the late 1990s. He became chairman of the company late last year, after Timothy M. Donahue, former Nextel chief executive, retired early. Forsee also ousted Sprint's chief operating officer, Len Lauer. That position remains vacant.
One of Forsee's most controversial moves was to commit $5 billion to building a new high-speed wireless network using a new technology called WiMax, which he promised would be up to five times faster than current cellular networks. He forged partnerships with start-up Clearwire to construct the network; with Google to search on the network; and with Motorola, Samsung and Nokia to build cutting edge-devices to roam on the network.
But he wanted to use WiMax technology, which met heavy skepticism from analysts because it is largely untested. The build-out has already hit delays.
Forsee tried to calm impatient investors by unveiling new cellphones, improving customer service, working with cable companies and revamping the company's marketing campaign. But he ran out of time by late summer, when the board scrapped the search for the No. 2 position and started looking for a replacement for the top job.
"Forsee will be blamed for a failed acquisition, but I don't believe he will be the last to exit," said Ben Abramovitz, senior analyst at ICAP Equity Research. "One man can't be blamed for all the issues Sprint currently has."
Staff writers Frank Ahrens and David Cho contributed to this report.
