OUR TAKE

Nextel Communicates

	Email this page Format for printing Reuse/Reprint
	Discussion Boards The Motley Fool Take

By Mathew Emmert (TMF Gambit)
May 21, 2003

In this brutally competitive wireless environment, you'd think all companies would be sharing the same fate -– mostly extinction. But there are few companies, wireless or otherwise, that have performed better than Nextel Communications (Nasdaq: NXTL) over the past year.

About 12 months ago, investors had all but given up on the company, sending its shares to $2.50 a stub, even while management insisted its annual earnings forecast was conservative. These days, neither trusting management nor trusting analysts seems an appealing option. But in Nextel's case, shareholders should have listened to the folks minding the store.

The company has trounced analyst estimates for the past four quarters, exceeding their earnings targets by an average of 111%. And the shares now change hands at over $14 because of it. That's not a bad profit if you got in at the bottom (try 460%), but I imagine few had the courage to do so, what with all the pessimism surrounding the company, and the industry.

Continuing its trend, Nextel reiterated its 2003 earnings forecast yesterday, and said it would add 1.7 million new customers this year. This is a great example of a company laying out its business plan and achieving success by executing it flawlessly. The wireless provider simply listened to what customers wanted, then delivered.

How many times has a friend shared an unhappy customer service experience? Usually they're red-faced, white knuckled, and so frustrated that they spew more spittle than verbiage. Not so with Nextel customers. Rarely do I hear such glowing reviews, and the company has the highest customer retention rates in the business to show for it.

Things are still far from ideal in the wireless industry. Debt loads remain high, and new competitive threats are constantly emerging. But this company is getting it right.

Nextel carries a substantial debt load from building out its network, but it has made significant progress towards debt reduction over the past year. It also has nearly $2.3 billion in cash or $2.21 per share, and is expected to generate an additional half a billion in free cash flow this year. With a profit margin approaching 25%, and trading at just 15 times this year's earnings, this company is worth some attention.

The Motley Fool is investors writing for investors. To view a writer's current stock holdings, check out his or her online personal profile.