Palm Pre Cannot Rescue Sprint from Second-Quarter Loss (
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The Palm Pre proved to be a hit for Sprint Nextel, but it couldn’t stop the
carrier from losing a quarter of a million customers during the second quarter
of 2009.
On July 29, Sprint announced consolidated net operating revenues of $8.1
billion for the second quarter—compared with $9.05 billion a year earlier—along
with a net loss of $384 million and a diluted loss per share of 13 cents.
Additionally, customer numbers fell from 49.1 million at the end of the first
quarter of 2009 to 48.8 million at the end of the second.
“As I prepared my comments for this earnings call, one observation was clear:
Sprint is not the same company it was 12 months ago,” Sprint CEO
Dan Hesse told investors and analysts during the earnings conference call.
“During prior quarters our focus on operating improvements and efficiencies
enabled Sprint to stabilize our earnings trend, and during the second quarter
we saw a sequential improvement in adjusted OIBDA [operating income before
deprecation and amortization],” said Hesse.
“We continue to generate strong free cash flow during the quarter, resulting in
a cumulative free cash flow production of almost $1.5 billion during the first
half of 2009.”
Hesse later said that the Palm Pre was the most successful launch in Sprint’s
history, in part thanks to the training it gave employees, and that the Pre
helped soften the impact of the arrival of the iPhone 3GS on competitor
AT&T.
“When there’s a new device launched, say the iPhone in particular, you’ll see a
blip for a period of time, in increased churn,” said Hesse.
“But we think that, just like a year ago, when the
[Samsung] Instinct helped to mitigate the impact of that significantly,
this year we had the Palm Pre, which mitigated that as well. I don’t want to
lead you to believe that there’s no impact at all from the iPhone—it is a
successful device. But I think we’ve mitigated the impact significantly with a
strong device lineup.”
Exclusivity agreements between manufacturers and carriers have come under
scrutiny lately, most especially regarding AT&T’s relationship with the
iPhone and Sprint’s with the Palm Pre—which will be much shorter lived than the
former’s.
“We are the exclusive provider of the device into 2010,” Hesse
said. “And we have no more to say other than that.”
Along with Keith Cowan, Sprint’s president of strategic planning and
corporate
initiatives, Hesse detailed the ways they’re working to turn the ailing
carrier
around, including vast improvements to customer service, excellent 3G
capabilities, a strong handset lineup, an early launch of 4G services
and also its recent acquisition of Virgin Mobile, which offers prepaid
services.
Sprint has struggled to retain postpaid subscribers, but its
prepaid service, Boost Mobile, has been a particular area of strength.
“The company’s prepaid division has been adding a significant amount of
subscribers since the introduction of the unlimited $50 Boost prepaid plan,
partially offsetting postpaid subscriber losses,” Kate Price, an analyst with
Technology Business Research, told eWEEK.
“Prepaid ARPU also increased $3 sequentially to $34, with the $50 unlimited
plan being the catalyst of the growth. Though the prepaid division is a small
segment of the company, it was the only segment to post revenue growth, and
will likely remain a focus for the company moving forward,” Price continued.
“The company’s purchase of Virgin Mobile also indicated prepaid will likely
receive increased focus from the company.”
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