Correction (June 4, 2008): In the analysis below, the first claim in the "selected Pros" section is wrong.  In taking notes on the Sprint 1Q08 earnings call, I mistakenly heard CEO Dan Hesse say that an iDEN / WiMAX Blackberry device would be delivered this year.  In reality, Hesse said am iDEN / WiFi Blackberry device would be delivered later this year.  This mistake was pointed out in a comment by "idenguy" on Seeking Alpha.  I do not know who "idenguy" is, but I thank him for the correction.  The implications of my mistake on my analysis is that, while iDEN might indeed prove to be a logical underpinning voice play for Clearwire in a bundled spin from Sprint, the product or handset foundation supporting such a scenario remains to be built.  I still believe that a long term future of iDEN under Sprint ownership will be hard to justify, given the inability of iDEN technology to evolve to any form of broadband. 

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Summary

Liberal buildout requirements for recently auctioned 700 MHz auctions will result in lower short term sales for infrastructure vendors, lower stock prices, and further consolidation.

See author's addendum (5/9/2008) at the bottom of this piece.

Sprint Nextel's (S) market capitalization has surged about $9B to over $26B or by more than 50% over past three weeks as of the end of trading, May 6, 2008, most recently based on speculation that big changes are in the offing. The market and investors seem to be waking up to the idea that the piece parts of Sprint really do add up to more than the whole.

Verizon (VZ) was the most successful in the 700 MHz auctions by utilizing a multi-pronged strategy to secure a superior spectrum position for the foreseeable future and positioning themselves to be in a position to control their own destiny regarding the industry trend towards open networks.

While AT&T (T) completed its objectives in the recently concluded 700 MHz auctions in filling out its spectrum holes, Verizon deserves kudos for the shrewdest, most comprehensive and successful auction strategy.

Sprint Nextel (S) continues to look for partners to share the cost of the WiMAX rollout, which will undoubtedly cost several billion dollars, but still has no takers.

Based on the intrinsic value of its spectrum holdings and its business operations, Sprint (S) is still a steal at its current market cap.

Analysis

Sprint (S) CEO Dan Hesse appears to be focused and decisive. He's bringing in trusted, new blood to the executive ranks. He still faces an uphill struggle. Investors, alienated employees and customers will need persistent and encouraging news to rebuild confidence in order for Sprint Nextel to stay in one piece long term. However, Hesse continues to earn positive marks for his leadership, regardless of the final outcome.

It's easy to sit back and offer suggestions and criticism on a particular company, especially if you don't have much skin in the game, i.e., your primary livelihood isn't tied to the enterprise. Dan Hesse continues to make decisive moves. After years of dysfunction throughout the executive ranks at Sprint Nextel, he deserves credit. It will still be weeks and months before we know if real changes are starting to take hold, and, indeed, more leadership of the kind we are seeing will be necessary for Sprint to stay whole and / or independent, if that is the goal. The level of discontent both within and outside Sprint Nextel is unusual, even for a company in distress. There are unconfirmed accusations by people who claim to be current or former employees of Enron-like fraud.

How low can the stock price go before Sprint gets taken out?

There are lots of possibilities and scenarios for Sprint (S) to be in play at its current market capitalization and stock price.

Could the Sprint Nextel (S) merger be undone - from a technical perspective?

An iDEN spin would be complex, but it would still be achievable with competent people in charge, and not as difficult as projected, given the relative lack of integration between the iDEN and CDMA networks.

Below is a possible scenario on how Sprint (S) will resolve its short term strategic issues and how this will all play out over the longer term in the wireless industry. In the end, the author suggests a slimmed down Sprint, after spinning off WiMAX and iDEN, is ultimately taken over.

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