Surprising few investors or telecom-industry watchers, The Wall Street Journal is reporting that Sprint Nextel (NYSE:S) is actively seeking to replace CEO Gary Forsee.
The third-largest wireless service provider has been taking its lumps over the past few years; its merger with Nextel has gone about as well as a dinner party between the Hatfields and the McCoys. Forsee engineered the $35 billion takeover of Nextel late in 2004, aiming to combine Sprint's widespread cellular coverage and spectrum assets with Nextel's premium base of high-paying subscribers.
The companies hoped to merge the two technologies Sprint and Nextel used (CDMA and iDEN, respectively) to create an extensive suite of best-of-class services. But the integration hasn't gone as well as the press releases hoped and hyped. Complaints from Nextel customers increased dramatically as Sprint struggled to maintain quality on a stressed network, and the defections to other providers such as AT&T (NYSE:T) and Verizon Wireless -- a joint venture between Verizon Communications (NYSE:VZ) and Vodafone (NYSE:VOD) -- started to show.
The ongoing issues in the commingling of Sprint and Nextel's businesses illustrate the uncertain nature of large corporate mergers. While AT&T has been relatively successful in blending Cingular, SBC, and the old version of its namesake, other telecom mergers haven't gone so well. Alcatel-Lucent (NYSE:ALU) is still struggling to make its recent marriage work, recently issuing its third profit warning this year.
Picking up the pieces of fallen giants isn't easy, either. Motorola (NYSE:MOT) brought in Ed Zander to reinvent the struggling cell-phone designer early in 2004. But now Zander's seat on the throne is in peril; the RAZR euphoria has evaporated too quickly, and Motorola is once again looking for a new path to success. But while the board of Sprint Nextel is reportedly looking to pull the rug out from under Forsee, Alcatel-Lucent's board just affirmed its support for CEO Patricia Russo.
One way or another, Sprint Nextel needs to do something, lest the company fall farther behind its peers in a newly invigorated competitive environment.
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