Forsee: WiMaxed Out

Sprint Chief's Bet Failed to Pay Off

Perhaps someday, WiMax will be the key to turning around Sprint Nextel, the beleaguered Reston cellphone company. Perhaps someday, consumers will walk and drive across the country, enjoying uninterrupted, high-speed Internet service, watching video, e-mailing and talking on the phone over the Web, thanks to WiMax.

But Sprint chief executive Gary D. Forsee -- the man who committed $5 billion this summer to turn the company into the nation's No. 1 WiMax provider -- won't be around to oversee it.

Forsee resigned yesterday afternoon after running the company for four years. On his watch, Sprint stock steadily climbed, from $12 per share to a high of more than $25 per share in early 2006. But shares have slumped since then, closing down nearly 3 percent yesterday at $18.50, as Wall Street criticized Forsee's decisions.

Specifically, analysts and investors thought that Forsee was short-shrifting his company's core business -- phones -- while throwing a much-riskier, high-cost Hail Mary: building a WiMax network. So far, the expensive project has been met with delays and technical hurdles.

WiMax is like a much bigger WiFi. WiFi allows you to cruise the Web from your local coffee shop without having to plug your laptop into an Internet connection, but if you walk too far away, you lose your signal. WiMax promises high-speed Internet service hundreds of miles wide.

The ultimate dream is overlapping WiMax zones covering the country, letting subscribers stay connected to the Internet even as they travel, getting passed off from one WiMax zone to the next in the same way that cellphone towers pass callers from one phone to the next.

Sprint's $5 billion investment is aimed at slowing other big telecoms, such as Verizon and AT&T, from becoming big players in WiMax. Owning the WiMax space could prove lucrative enough to be a change agent for the troubled Sprint, enabling it to transform from a third-place cellphone carrier that's barely adding customers into the dominant provider of next-generation communications.

This summer, Forsee predicted Sprint would reach 100 million Americans with its WiMax service. In 2006, when Sprint announced plans to build a WiMax network, Forsee said: "We'll give customers the power to harness business information and personal entertainment easily and inexpensively -- and in ways that they will one day wonder how they lived without."

But the technology to make WiMax work has been slow to roll out, and analysts estimate it won't gain consumer momentum until late 2008 at the earliest. Sprint is still testing mobile WiMax technology. It announced during the summer that it would partner with start-up Clearwire, which was trying to build its own WiMax network, to combine forces and speed rollout. But Sprint said last week that the finalization of the Clearwire deal is being delayed.

Sprint is now in the position of figuring how to move forward with the WiMax plan -- without the man who dreamed up the plan. This far in, Sprint may be committed to building out the WiMax network but may not be able to do it fast enough to adequately transform the company to Wall Street's liking.

Sprint's WiMax predicament is like owning miles of pristine beachfront property and then being unable to build condos on your very valuable, exclusive property.

"The fact that they bought a $5 billion network without testing it was a violation of fiduciary duty," said Patrick Comack, senior equity analyst at Zachary Investment Research in Miami Beach. "It's like buying a $5 billion car without test-driving it first."