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Sprint Shares Jumped, Then Dropped: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of wireless No. 3 Sprint Nextel (NYSE: S  ) were giving investors a roller-coaster ride today, rising as much as 13% before reversing course and falling as much as 22% from their high point to register a 12% loss.

So what: In outlining its plans for the future today, Sprint said that the rollout of its new Long-Term Evolution network is going well and will cover as many people as the WiMax coverage it currently offers from a partnership with Clearwire (Nasdaq: CLWR  ) by the end of next year. By 2013, it will have even broader coverage (Clearwire shares are plunging on the news). In addition, the company made some bullish comments on its deal to add the iPhone to its phone mix, though executives wouldn't comment on the commitments the company reportedly made with Apple (Nasdaq: AAPL  ) to get the iPhone.

Big network revamps like this don't come for free, though. The positive momentum that Sprint shares had in the morning evaporated like so much delicate morning dew as investors grew heated over the company's admission that it will need to raise new capital or draw on its line of credit to finance its build-out.

Now what: Earlier in the week I said that Sprint's move to get the iPhone -- assuming reports of its hefty commitment are true -- looked like a "wild pitch" to desperately try to keep pace with its competitors. My view hasn't changed since then. However, the company's push to roll out its fast new network is much more interesting and could help get the company back on track if it can give customers a really positive experience.

Value investors like Dodge & Cox and David Einhorn's Greenlight Capital have flocked to Sprint because although the company is unprofitable, it is still cash-flow positive. That's all well and good, but with nearly $19 billion in debt and a business that's having trouble keeping up with competition, it's still crucial that the company spend money wisely and find its footing.

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Read/Post Comments (4) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 07, 2011, at 2:32 PM, tounderstand wrote:

    People don't understand whats going on. Lets get things straight. Sprint doesnt have a 4g/lte network anywhere near close to being developed yet. They don't have the money for this as well! They just spent a huge amount of money accquiring the Iphone!

    I don't own clearwire stock, but i might start owning a couple thousand shares now. It will be reveresed. Sprint cant take another landfall with spending money. Back to Clearwire! Just watch!

  • Report this Comment On October 07, 2011, at 4:23 PM, memoandstitch wrote:

    Only a tiny fraction of Americans will pay for high-speed network. Only 53% of Americans have jobs and most of the jobs can't even afford them Netflix plans.

  • Report this Comment On October 07, 2011, at 6:56 PM, larrysd1 wrote:

    Most of those people that in the past few months were saying positive things about CLWR were not today,whatever.The same quality people that run the company are still there today.The spectrum they have is still there even after the events of today.Half the sell off was from the crap going on in Europe fear driven not fundamentals.Staying with Clearwire! Just watch.Bought some more at that cheap $ today.

    Tounderstand,thanks for your thoughts.

  • Report this Comment On October 10, 2011, at 11:18 PM, rbacher wrote:

    @memoandstich: Wow, the unemployment rate is 47%??? Who knew? Certainly not I. What exactly were you smoking that led you to believe that only 53% of Americans have a job? Oh, and I think you meant, "THOSE" Sprint/Nextel plans, NOT "THEM" Netflix plans. This article concerns Sprint, not Netflix, even if one uses proper grammar.

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