Sprint Nextel Corp., the nation's third-largest mobile phone company, said yesterday that third-quarter profit and revenue rose in its first earnings report since Sprint Corp. acquired Nextel Communications Inc. in August.
The Reston company's stock price fell, however, as the market tried to digest a profit report complicated by effects of the $35 billion merger and the costs of recovering from Hurricane Katrina.
Sprint Nextel had third-quarter profit of $516 million (23 cents a share), compared with a net loss of $1.9 billion ($1.32) a year ago when it took a big charge to write down the value of its long-distance network.
The earnings reflected Sprint's stand-alone results through Aug. 12, when the merger with Nextel closed, and the performance of both companies for the rest of the third quarter.
Sprint Nextel also released "pro forma" figures that calculated what earnings would have been if the two companies had always been combined and that excluded some merger-related accounting changes.
On that basis, Sprint Nextel would have reported third-quarter earnings of 41 cents a share, up from 31 cents a year earlier and above the Wall Street consensus expectation of 38 cents. Adjusted revenue rose about 8 percent, to $11.2 billion from $10.3 billion.
Sprint Nextel shares fell 65 cents, or 2.75 percent, to close at $23 after the report was released.
David W. Barden, the telecom analyst at Banc of America Securities LLC, said he thought there was some "confusion" in the market about whether the company's earnings reflected weaker operations rather than the costs and accounting implications of the merger.
"It appears that the cost impact was predominately merger- and merger-accounting-related, rather than reflecting weaker-than-anticipated operations," Barden said.
"Our position is that the market's reaction is somewhat unwarranted given the level of complexity" of the merged company's first earnings report, Barden added.
"[Sprint Nextel] is executing well and remains on track to avoid any significant operational disruptions related to the merger," Goldman Sachs Group Inc. telecom analyst Jason Armstrong wrote in a research report.
The company said it added 1.3 million subscribers in its wireless business, the main driver of earnings, bringing its total mobile phone customers to 45.6 million. Company officials said they expect to add another 1.4 million subscribers in the fourth quarter.
The company said Hurricane Katrina and other storms during the quarter had a negative pretax impact of $112 million in the quarter as a result of credits to affected customers, bad debt expenditures, repair costs and writing down assets damaged by the storm.
The company repeated its forecast that it will achieve $14.5 billion in savings from the merger through 2008.
Sprint Nextel chief executive Gary D. Forsee was upbeat in a presentation to analysts, saying, "We are significantly ahead of schedule on all merger initiatives and the results we are producing."