Sprint-Nextel LBO Speculation Resurfaces: Why Now?

| About: Sprint Corporation (S)

Last week I posted an update to my mobile market hypothesis. As usual I received many comments, both privately and publicly. As a rule I let all comments (pro and con) stand unedited unless there is an offensive element. Privately I received this email on Wednesday:

---------- Forwarded message ----------
From: Mark O'Rourke
Date: Mar 21, 2007 1:04 PM
Subject: Sprint (NYSE:S)
To: wrkoss

You're an idiot. Get some sleep. You'll feel better.


No big deal, obviously Mark is very passionate about Sprint or the mobile market in general. The best part about his email arrived last night. I am looking at new material on my reader and I come across this post. I will quote the post from theDeal.com:

“Sprint-Nextel LBO Resurfaces
Back in November, The Deal suggested that wireless provider Sprint-Nextel could be a prime target for buyout firms. At the time, its stock was trading at $17 a share giving it an enterprise value of $75 billion. Fast forward four months, and now analysts at Goldman Sachs are rehashing the idea of a Sprint-Nextel LBO. Shares in the company have rebounded, and trade at about $20 a share leading some to suggest a price tag of $80 billion, according to a BusinessWeek story. —Matthew Wurtzel

Why would this speculation resurface? Could be that things are going so well that the executives at Sprint are thinking “hey, the future is so bright, so easy and so glorious, let’s go private?” Could it be that the really smart people at Goldman-Sachs are sitting around on Friday asking each other “what could we spend $80B on? Any ideas? Does anyone have any ideas on how we could spend $80B on company?

Here is the real reason why this report emerged in the press: there is some amount of truth in it. Even if that truth was just some lazy math on the back of napkin at Starbucks between some Sprint executives and team from GS, the truth is the truth. Executive leaders would consider taking a company like Sprint private because it would make it easier to deal with the ugliness of the business trends and enable them to make aggressive business decisions without having to answer endless questions from shareholders every 90 days.

S 1-yr chart

Full Disclosure: I do not own shares of any of the companies mentioned in this post.