Investors may be getting a little worried about Sprint Nextel (S), as the company has not been doing so well recently. There are some signs of improvement though, and even if this still does not appear like the greatest of stocks, it does have potential once again. I expect small increases in the Sprint stock prices, and the company is at least getting back on track to establish its strength in the industry once again.
Sprint has received much attention for recently deciding to shut down its Nextel division in the early part of next year. This appears to be the best option available to Sprint. I do not think it will have a significantly positive effect on the company, but I do think it will remove something that has been holding it back. In other words, Sprint is ditching a part of its business that would only continue to hurt it in the future.
The decision to close its Nextel division should not surprise anyone. Nextel's mobile phones still utilize "push to talk" technology, which has become quite outdated through modern developments in the tech industry. Nextel's model, therefore, is no longer in demand, so this division is not as profitable as it used to be. This is not the only way Nextel is out of date, as its mobile phones have also continued using 2G. Now that 4G is gaining popularity, there is very limited demand for 2G. Furthermore, 2G does not have the capability of supporting smartphones, so this division just cannot keep up with the times. It seems obvious, therefore, that Sprint has to rid itself of Nextel in order to move forward.
Sprint is also moving forward in other ways, as it is beginning to focus on building its 4G LTE network. This will replace its former WiMAX network, and initial tests of the network indicate that it should be quite competitive. This will help Sprint eliminate another one of its weaknesses and continue moving the company forward. Of course, this is all based on initial testing, and everyone will have to wait for a better indication about the success or failure of this new network.
Competition is still intense though, so Sprint needs this network to function smoothly. Verizon (VZ) and AT&T (T) have a wide lead over Sprint when it comes to 4G technology, and they are continuing to expand in large and small ways. Verizon is set to include global roaming in its wireless 4G LTE devices, which should greatly benefit the company. AT&T is continuing to expand its coverage in localized settings. For example, it recently improved its 3G and 4G coverage in Virginia. This is a slow-but-effective way of gaining a greater market share for AT&T. Both companies are continuing to grow and will not make it easy for Sprint to break into this component of the market.
While Sprint is moving in the right direction, its future will not be an easy one. In addition to the competition it will face, the company is attempting to fight a $300 million lawsuit related to taxes. One would hope that the company can overcome this, but it is just another thing that adds to the difficulties facing Sprint in the future.
Sprint has more good news though, and its future does continue to look better. Sprint will be adding Apple's (AAPL) iPhone to its Virgin Mobile USA prepaid offerings. Virgin is adding the iPhone to its business already this month. It is expecting to rival competitor Leap Wireless (LEAP), which will also begin selling the prepaid phone. Virgin will offer the iPhone at a price of $649, which is the same as Apple's offer. Virgin, however, is offering unlimited data plans without requiring customers to lock in to a two-year contract. The plans would cost less than the prices set by other post-paid providers, which gives the company another advantage. Sprint assured investors that the 2012 earnings will not be affected in a negative way by the addition of the iPhone. In fact, it will help the company reach a $15.5 billion commitment to Apple. I think this is a very positive move for the company and should help it continue to become more competitive.
While Sprint has appeared weak, it added more subscribers in the first quarter than AT&T and Verizon. This shows that it has already begun to make a dent in the business of AT&T and Verizon. The launch of its prepaid iPhone offering should only bring more success to the company. If its 4G network is as good as early reports are indicating, Sprint may truly be on a comeback. I would not suggest that AT&T and Verizon are weak, but Sprint certainly appears to be making a better name for itself.
Sprint is also making a mark in small business technology, as it recently released a new group of Sprint Biz 360 solutions. Senior Vice President Jaime Jones says, "Demand continues to be strong for individual Sprint Biz 360 features and full-on bundles, so we're refreshing the portfolio with new offers and services to continue to make it appealing." The business world is an important aspect of the tech industry, so this is certainly a good move from Sprint. There are many improvements in this newest release, and this should help Sprint continue becoming a bigger name.
Once again, business technology is only one area where Sprint is growing. Sprint is also working on its 4G LTE network, and it is ditching its outdated Nextel division. It is also beginning to take advantage of the iPhone market and may be able to better compete with Verizon and AT&T. I think there are difficulties in Sprint's future, but the company definitely seems to be making progress. I still think this is a risky stock, but I think it has a lot of potential and should be improving for the time being.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.