Sprint's $30.7 Billion Hangover
By David Twiddy
Sprint Nextel Corp., the nation's third-largest wireless provider, said Thursday it will have to write off a significant chunk of the remaining value of its 2005 purchase of Reston's Nextel Communications Inc. and several affiliates, reflecting the continued struggles of its wireless operations.
In a securities filing, the company said it is taking a hard look at the $30.7 billion carried on its books for goodwill -- an accounting term for the difference between what is paid for acquisitions and what the assets are actually worth -- related to wireless takeovers.
"Based on the work completed to date, Sprint Nextel will be required to record a material, non-cash impairment charge that will represent a substantial portion, and potentially all, of the goodwill recorded on its balance sheet," the company said in a securities filing.
The write-down won't affect the company's day-to-day operations, its cash balance or place the company in danger of violating its debt covenants, according to Sprint Nextel spokesman James Fisher.
"We remain sound financially and we have good cash flow from operations," Fisher said.
The company, based in Reston, Va., with operational headquarters in Overland Park, Kan., said it would announce the amount of the writedown as part of its fourth-quarter results, scheduled to be released on Feb. 28.
Investors were nonplussed by the news, with shares up 21 cents to $10.57 in afternoon trading Thursday.
Jackson Securities analyst Greg Gorbatenko said the writedowns are not on tangible assets and the markets already expected a hit after months of disappointing results.
"It verifies those assets aren't as valuable as they once were, which everyone sort of already knew," he said.
Sprint Nextel has struggled since buying Nextel in August 2005, falling far behind rivals AT&T and Verizon Wireless to attract and retain customers. It also was forced to buy Nextel Partners and most of its Sprint-branded affiliates following the Nextel purchase.
The company's problems led to the resignation of Chief Executive Officer Gary Forsee in October. The company in December appointed Dan Hesse, the former chief executive officer of Sprint's local telephone service spinoff Embarq Corp., to take over and attempt to revive the company.
Sprint shares rose 14 cents to $10.50 in afternoon trading Thursday.
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