Investors are always captivated by a good love story. And nothing moves them to buy shares like the tale of erstwhile lovers who joyously come back into each other's arms.
Shares of Sprint Nextel (NYSE: S) and Clearwire (Nasdaq: CLWR) rocketed higher yesterday on the mere rumor that the aspiring WiMAX network operators would hook up again to deploy a nationwide network. The Wall Street Journal sparked thoughts of romance with a report that the two were in serious negotiations to renew a partnership of some sort.
The reunion of the two companies has been a constant speculation since the two split last year following Sprint Nextel's ousting of then-CEO Gary Forsee. While the past partnership was more of a "division of labor" where each company would build out and support portions of a shared network, the new deal reportedly being contemplated could take a number of different forms.
For one, the deal is rumored to bring in new cash from outside investors. Parties mentioned in the Journal article as perhaps being interested in furthering WiMAX in the U.S. include Intel (Nasdaq: INTC), Google (Nasdaq: GOOG) and even Best Buy (NYSE: BBY). Motorola (NYSE: MOT) has been a big proponent of WiMAX as well, but hard times in Schaumburg, Ill., will likely keep it from loosening its purse strings. The deal could also involve spinning off the WiMAX unit of Sprint Nextel and merging it with Clearwire's operations.
Just about any form of recoupling would be welcome news to Sprint Nextel at this point. New CEO Dan Hesse has been cleaning house lately, generating some 4,000 pink slips, including exit plans for three top executives. As long as any deal reached eases the capital burden on the company as it attempts to turn around operations, investors will likely be happy.
But Sprint Nextel needs to maintain a long-term growth strategy. With competitors Verizon Wireless and AT&T (NYSE: T) going full steam ahead on wireless broadband initiatives, the company can't completely abandon the future to correct errors of the past.
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