Sprint an attractive takeover candidate?
March 3rd, 2008 by Grant in: Business, Investing, Stock Thoughts, TechnologySprint (S: chart, web, Y!) has been down in the dumps lately. Actually for the last several years (or more accurately since they merged with Nextel). They just wrote down $29 billion, or the equivalent of that same Nextel merger.
Sprint is a poorly run company, not just at the executive level, but all across the board (although new CEO Dan Hesse is making a valiant effort to turn that around). Their marketing department never really sold the Nextel technology, and little money went into preserving the customer base Nextel generated. On top of that, Sprint didn’t spend enough time, effort and money keeping their own customers.
Sprint took a massive nose dive on the write down news, and closing last Friday at a measly $7.11 per share. So the question becomes, are they really worth $7.11 or was the dive on negative news an over reaction further fueled by negative overall market sentiment?
Additionally, the low share price could put enough lip stick on this rode rough, put away wet, stock that it looks attractive as a takeover bid by a competitor like Verizon (VZ: chart, web, Y!) or AT&T (T: chart, web, Y!).
If an acquisition were to be in the works, the take over bid would have to account for about $20 billion in debt, which would only serve to increase the cost per customer. On top of that, the differences in Sprints networks as compared to the competition would require some infrastructure modification which would be capital intensive. On the other hand, Sprint does hold the WiMax initiative, which could be attractive to a company like Verizon, or even Comcast (CMCSA: chart, web, Y!).
Right now, it takes little effort on Verizon or AT&T’s part to harvest subscribers from a downtrodden Sprint, which is effectively a free trip past “GO” to collect $200. So why would anyone want to buy Sprint when they can just take customers free of charge? Well while the infrastructure would need modification to provide commonality, the company could be bought well below the net asset value, and integrated just like Cingular was integrated into AT&T.
For now, I’ll sit back and see what happens.
Sprint is hardly a good buy right now, especially with so many other companies out there with stronger fundamentals at a great discount weighed down by flailing market sentiment.
Tags: CMCSA | merger | S | T | take over target | VZ
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March 5th, 2008 at 8:03 am
You present an interesting point Grant.
It sure would “seem” that Sprint could be an attractive takeover candidate at $7.00/share. Of course, I don’t have the answers, but I’m sure that there’s a bunch of other folks probably thinking what you’re thinking. I was thinking it myself.
While it’s a poorly run company, that could easily change with the right mixture of management and board. A takeover could fix that.
About the infrastructure? I wouldn’t know.
I’m sure that some customers may switch over to a competitor, but just like me, price, features, and network range determine who I’m going to use. I’m a Sprint user myself and I’m not planning on changing unless Sprint raises my rates or a competitor offers a better deal.
Some other things to consider would be the “Sprint” brand. How much is the brand name worth? I’m sure this has some value.
A buyout price would have to be high enough to entice shareholders to accept a deal, but I’m sure insiders could spin a tale of woe that would cast doubt over it’s ability to continue as a going concern if they wanted.
It’s interesting. I’ll bet we’ll hear more about this topic elsewhere in the near future. Whaddya you think?
Grant? Can you hear me? Can you hear me now?
Mike