Report: Shareholder Unrest Building at Sprint
Recently, a shareholder revolt caused major changes at gaming company Take-Two. Could momentum for a similar change be building at telecom Sprint Nextel?
'Activist' investor firm Relational Investors has quietly been building a 1 percent stake in the company, and has demanded in meetings that the Sprint rein in spending and shed certain subsidiaries in an effort to become profitable, news sources report.
Sprint's merger with Nextel has not gone as smoothly as planned, and the fallout has begun to harm the company's performance. Last quarter the company lost some 306,000 subscribers amid troubles in retaining customers in the Nextel division.
With Sprint's market value currently some $55 billion USD, it will be next to impossible for Relational to acquire a large enough stake as to force the changes on its own. However, the firm could sew enough discontent as to bring other shareholders on its side.
The shareholder unrest could put CEO Gary Forsee's job at risk as well. Internally, it is said that employees are blaming poor management for the company's woes, and inaction following the Nextel merger is costing the company now.
At least in the short term, news of Relational's push is having a positive affect on the stock. In midday trading Thursday, Sprint stock was up 2.8 percent in heavy trading. However, without any response from the management itself, it's likely any boost would be short-term.
News sources are also saying that Sprint's WiMAX initiative is also worrying investors. Over $3 billion would need to be spent in order to get the network up and running, and many are not sold on the company's plans.
News of Relational's moves were first reported on the Wall Street Journal website on Thursday.