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					Investment Rating          Sprint Nextel Corporation(S)
Buy
                           I. Investment Highlights
Pricing
                           Company Profile
Closing Price   $25.58
52 Week High    $21.57     Sprint Nextel offers several wireless and wireline
52 Week Low     $27.20
                           communication services for its consumers. Founded as a
Profitability &            small local phone service company in Abilene, Kansas in
Effectiveness (ttm)
                           1899, today Sprint Nextel’s sophisticated network carries
ROA               4.06%
ROE               5.46%    long and short-distance voice and data services and
Profit Margin     5.15%
                           provides wholesale services and Internet access.
Operating Margin 13.15%

Market Data
                           In 2005, Sprint acquired Nextel for 36 billion dollars
Total Assets     $ 102B
Volume       18,577,900    transforming itself into the third largest wireless
Avg Vol (3m) 13,622,400
                           telecommunication company in the United States. Under
Div & Yield 0.10(0.40%)
Market Cap        70.7B    Sprint PCS and Nextel brands, the company serves
EPS (ttm)           0.87
                           nearly 50 million subscribers.
P/E (ttm)          29.2

                           The company currently maintains operational
Sabuhi Sardarli            headquarters in Overland Park, Kansas even though its
ssdwc@mizzou.edu
                           corporate headquarters is located in Reston, Virginia.
II. Executive Summary
Investment Recommendation: Buy
Pros:
       Impressive Growth Potential
       Presence and potential for growth in international markets
       One of three market leaders in the US
Cons:
       Relatively high beta
       Merger may cause temporary operational problems




III. Company Description


Sprint Nextel is organized into wireless and wireline segments. The wireless segment
offers wireless mobile telephone and data transmission services. Data communication
services are comprised of wireless imaging; Internet access, messaging and email
services; wireless entertainment; asset and fleet management, and dispatch services;
walkie-talkie services; as well as product sales such as carrying cases, hands-free devices,
batteries, and battery chargers to consumers, agents, and third party distributors.


The wireline segment consists of various services in long-distance and local telephony.




IV. Economic and Industry Environment


1. Market Definition
The wireless telecommunications market is defined as including cellular (mobile) phones,
pagers and any other wireless or cellular telecommunication service.
2. Market Analysis
The United States wireless telecommunications services market is a standard-bearer in
this area. High subscriber rates and revenues and with a majority of the market penetrated
it seems that the US can no longer expand. However, the US market still wants to
continue growth and with all of the developments in the market, this could become a
reality.


The US wireless telecommunications services market generated total revenues of $90.7
billion in 2004, representing a compound annual growth rate of 14% for the five-year
period spanning 2000-2004. This growth is comparable to Canada and Europe, however,
once again the Asia-Pacific region is still growing at a rapid pace, recording a growth rate
of 35.9%.


The subscriber volumes of the wireless market increased with a growth rate of 11.9%
between 2000-2004, reaching a total of 171.7 million subscribers. This growth is
approximately the same as in Europe and Canada and is behind Asia-Pacific. Although
penetration is high in the US, the opportunity to go beyond 100% is there.


Looking forward, the wireless telecommunications services market is predicted to see its
performance decelerate, with an anticipated growth rate of 9.2% for the five-year period.




3. Product Life Cycle
Product life cycle in the telecommunication industry is relatively short compared to other
industries. Many products are built on existing products by adding new features and
decreasing weight and size. When core technologies change, large investments are
necessary to develop and launch new line of products that are compatible with the new
core technology.
V. Competition


Alltel Corporation
Alltel Corporation (Alltel) specializes in providing communication and information
services in the US. The company is a regional provider of wireless, wireline, and Internet
products and services in about 26 states. It is headquartered in Little Rock, Arkansas and
employs about 19,000 people.


Cingular Wireless LLC
Cingular Wireless is a wireless communications services company, formed through a
joint venture between BellSouth and SBC Communications. Recently, AT&T has
proposed to acquire Bell South, claiming 100% of Cingular Wireless with it. Cingular is
primarily engaged in providing voice and data services in the US. It is headquartered in
Atlanta, Georgia and employs about 70,000 people.


Verizon Wireless Inc.
Verizon Wireless is a wireless communications provider in the US. It is a joint venture
between Verizon Communications and Vodafone. It offers wireless voice and data
services to about 43.8 million customers, over one of the largest networks in the US. It is
the second largest wireless carrier in terms of the number of customers and revenues. The
company is headquartered in Bedminster, New Jersey and employs about 51,000 people.


T-Mobile USA, Inc.
T-Mobile USA, one of the largest GSM operators in the world, provides communications
related services. The company is a subsidiary of T-Mobile International. T-Mobile is
headquartered in Bellevue, Washington.
Competitor Analysis

Direct Competitor Comparison
                              S         Cellco     Cingular  T-Mobile     Industry
Market Cap:                75.70B           N/A         N/A       N/A      84.11M
Employees:                  79,900      498,001      703,001  226,161           164
Qtrly Rev Growth (yoy):    63.00%           N/A         N/A       N/A      12.80%
Revenue (ttm):             34.68B       27.66B1     19.44B1    9.37B1      77.81M
Gross Margin (ttm):        58.52%           N/A         N/A       N/A      47.42%
EBITDA (ttm):              10.94B           N/A         N/A       N/A       33.00K
Oper Margins (ttm):        13.15%           N/A         N/A       N/A       -4.66%
Net Income (ttm):            1.79B       4.70B1    201.00M1       N/A       -3.29M
EPS (ttm):                   0.866          N/A         N/A       N/A          N/A
P/E (ttm):                   29.46          N/A         N/A       N/A          29.3
PEG (5 yr expected):           1.04         N/A         N/A       N/A          1.22
P/S (ttm):                     2.17         N/A         N/A       N/A          2.31


Industry Leader By Sales
                                      Symbol   Price   Change   Market       P/E
                                                                 Cap
Nippon Telegraph & Telephone            NTT    21.74    0.93%    30.05B       7.71
Corp.
Deutsche Telekom AG                      DT    16.89    0.48%    70.91B      10.83
Verizon Communications Inc.              VZ    34.32    0.38%    94.89B      12.97
Vodafone Group plc                     VOD     22.56    4.83%   143.69B       N/A
France Telecom                          FTE    22.67    0.53%    59.01B       8.65
NTT DoCoMo Inc.                        DCM     14.45    1.12%    64.40B      15.54
Telefonica SA                           TEF    48.15    0.77%    77.25B      14.77
AT&T Inc.                                 T    27.12   -0.40%   105.22B      19.11
BT Group plc                             BT     39.5    1.44%    33.40B      14.96
VI. Company Position


1. Marketing Fundamentals
Sprint Nextel has taken a significantly different approach in investing in the company’s
future. Sprint Nextel’s ultimate goal is to bring the United States wireless
telecommunication industry to the advancement level of other markets. Wireless
telecommunication is lagging behind in terms of technology and advancements compared
to most European and Asian markets. Sprint Nextel has chosen to introduce innovative
products which are not available in the United States market.


Sprint Nextel has even taken an approach to spin-off its local and long-distance telephone
services under new company named Embarq. This is further evidence that Sprint Nextel
is a growth oriented company that wants to be the leader in the wireless
telecommunication industry.


2. Technology
Technology is the central focus of the telecommunications in industry. Virtually all
Research and Development investments are made toward next generation technology that
will be superior to the current one. Since the GSM network, companies have launched
the 3G network that is able to transmit more data more quickly between devices and offer
more wireless services.


3. Legal
Reston, Va. — 10/04/2005 (Sprint Nextel official press release)
Sprint Nextel Corp. (NYSE: S) today announced one of its subsidiaries filed a patent
infringement lawsuit against Vonage Holdings Corp., Voiceglo Holdings Inc. and
theglobe.com Inc. in the U. S. District Court for the District of Kansas. Sprint Nextel
asserts these companies have willfully infringed seven patents relating to voice over
packet technology developed by Sprint Nextel.
The patents protect a series of innovations that enable the processing and delivery of
packetized voice and data communications, including Voice over Internet Protocol
(“VoIP”) communications. In the lawsuit, Sprint Nextel seeks an injunction that would
prevent these companies from further misappropriating Sprint Nextel’s technology and
infringing Sprint Nextel’s patents. The lawsuit also seeks unspecified monetary damages
arising from the companies’ unauthorized use of the patented technology and the
continued willful infringement of Sprint Nextel’s patents.


4. Management

Key Executives

Mr. Gary D. Forsee , 55
Chief Executive Officer, President, Director and Member of Executive Committee

Mr. Len J. Lauer , 48
Chief Operating Officer

Mr. Michael B. Fuller , 61
Chief Operating Officer of Local Telecommunications Division

Mr. Timothy M. Donahue , 56
Executive Chairman and Chairman of Executive Committee

Mr. Paul Saleh , 49
Chief Financial Officer
VII. Financial Statement Analysis


1. Trend Analysis (S vs. S&P500 and S vs. VOD)

Since early 2005, Sprint Nextel stock has consistently over-performed the Standard and
Poor’s 500 Index. In the long term, the company’s stock has failed to deliver returns
comparable those of the S&P 500.
In comparison to Vodafone Group Plc (VOD), the only other telecommunication
company which Truman Tracy fund held, Sprint Nextel is a much better investment
choice because of the stock’s performance. (see below)
2. Company Reports Analysis

In recent history, Sprint Nextel reported a net loss of 1.02 million dollars. This was
largely due to a $3.5 billion impairment charge for its long-distance assets. However,
this loss was not as large as the analysts predicted it would be. These one-time charges
occurred during the third quarter before the Sprint Nextel merger announcement.


In the fiscal year of 2005, Sprint’s fourth quarter income failed to meet expectations
because of merger charges and posted modest income figures in 2005.



                                    Income Statement

 PERIOD ENDING                                     31-Dec-05         31-Dec-04      31-Dec-03
 Total Revenue                                   34,680,000        27,428,000     26,197,000
 Cost of Revenue                                 14,384,000        12,656,000     11,658,000

 Gross Profit                                    20,296,000        14,772,000     14,539,000

        Operating Expenses
        Research Development                                -                 -                -
        Selling General and
        Administrative                           10,076,000         6,624,000       6,608,000
        Non Recurring                               125,000         3,731,000       1,951,000
        Others                                    6,269,000         4,720,000       4,973,000

        Total Operating Expenses                            -                 -                -


 Operating Income or Loss                          3,826,000           -303,000     1,007,000
       Income from Continuing Operations
       Total Other Income/Expenses Net               321,000            -52,000          -110,000
       Earnings Before Interest And
       Taxes                                       4,257,000          -355,000        897,000
       Interest Expense                            1,351,000        1,248,000       1,401,000
       Income Before Tax                           2,906,000        -1,603,000        -504,000
       Income Tax Expense                          1,105,000          -591,000        -212,000
       Minority Interest                                   -                -               -

        Net Income From Continuing Ops             1,801,000         -1,012,000          -292,000
       Non-recurring Events
       Discontinued Operations                        -                -     1,324,000
       Extraordinary Items                            -                -             -
       Effect Of Accounting Changes              -16,000               -       258,000
       Other Items                                    -                -             -

Net Income                                    1,785,000        -1,012,000    1,290,000
Preferred Stock And Other Adjustments             -7,000          -16,000        -7,000

Net Income Applicable To Common
Shares                                       $1,778,000      ($1,028,000)   $1,283,000




                                 Balance Sheet

PERIOD ENDING                    31-Dec-05            31-Dec-04              31-Dec-03
Assets
Current Assets
   Cash And Cash
   Equivalents                   8,902,000            4,556,000              2,424,000
   Short Term
   Investments                   1,763,000                    -                125,000
   Net Receivables               6,638,000            4,156,000              2,902,000
   Inventory                       950,000              651,000                582,000
   Other Current
   Assets                          839,000                612,000             578,000

Total Current Assets            19,092,000            9,975,000              6,611,000
Long Term Investments            2,369,000                    -                423,000
Property Plant and
Equipment                       31,133,000           22,628,000             27,101,000
Goodwill                        21,315,000            4,401,000              4,401,000
Intangible Assets               28,019,000            3,435,000              3,417,000
Accumulated
Amortization                             -                      -               3,000
Other Assets                       652,000                882,000             725,000
Deferred Long Term
Asset Charges                     -             -             -

Total Assets            102,580,000    41,321,000    42,675,000
Liabilities
Current Liabilities
   Accounts Payable       9,003,000     4,222,000     4,174,000
   Short/Current Long
   Term Debt              5,047,000     1,288,000      594,000
   Other Current
   Liabilities                    -     1,392,000     1,708,000

Total Current
Liabilities              14,050,000     6,902,000     6,476,000
Long Term Debt           20,632,000    15,916,000    18,566,000
Other Liabilities         4,027,000     2,559,000     2,548,000
Deferred Long Term
Liability Charges        11,687,000     2,176,000     1,725,000
Minority Interest                 -             -             -
Negative Goodwill                 -             -             -


Total Liabilities        50,396,000    27,553,000    29,315,000
Stockholders' Equity
Misc Stocks Options
Warrants                          -             -             -
Redeemable Preferred
Stock                       247,000       247,000       247,000
Preferred Stock                   -             -             -
Common Stock              5,846,000     2,950,000     2,844,000
Retained Earnings           681,000       -586,000      906,000
Treasury Stock                    -             -             -
Capital Surplus          46,136,000    11,873,000    10,084,000
Other Stockholder
Equity                      -726,000      -716,000      -721,000

Total Stockholder
Equity                   51,937,000    13,521,000    13,113,000

Net Tangible Assets      $2,603,000    $5,685,000    $5,295,000
                              Cash Flow Statement

PERIOD ENDING                        31-Dec-05             31-Dec-04    31-Dec-03
Net Income                           1,785,000             -1,012,000   1,290,000

Operating Activities, Cash Flows Provided By or Used In
Depreciation                        6,269,000           4,720,000       4,973,000
Adjustments To Net Income           1,697,000           2,989,000         803,000
Changes In Accounts
Receivables                            -442,000           -231,000         75,000
Changes In Liabilities                299,000             -117,000        -856,000
Changes In Inventories                  11,000             -22,000        204,000
Changes In Other Operating
Activities                          1,059,000             298,000       2,259,000

Total Cash Flow From
Operating Activities               10,678,000              6,625,000    8,748,000

Investing Activities, Cash Flows Provided By or Used In
Capital Expenditures                  -5,057,000           -3,980,000   -3,797,000
Investments                              -13,000             145,000      -334,000
Other Cashflows from
Investing Activities                    346,000              22,000       101,000

Total Cash Flows From
Investing Activities                 -4,724,000            -3,813,000   -4,030,000

Financing Activities, Cash Flows Provided By or Used In
Dividends Paid                         -525,000           -670,000        -457,000
Sale Purchase of Stock                 432,000          1,874,000          12,000
Net Borrowings                       -1,170,000         -1,884,000      -2,908,000
Other Cash Flows from
Financing Activities                    35,000                  -          24,000

Total Cash Flows From
Financing Activities                 -1,228,000              -680,000   -3,329,000
Effect Of Exchange Rate
Changes                                      -                     -            -

Change In Cash and Cash
Equivalents                        $4,726,000             $2,132,000    $1,389,000
3. Financial Forecasts (from analysts)
There are increasingly more analysts considering Sprint Nextel as Strong Buy. This is
most like due to impressive estimated growth of the company in the industry that is close
to saturation. As more time passes from the Nextel merger date, skepticism about future
success of Sprint Nextel is expected to decrease.


                   Current Month              Last Month                  Two Months   Three Months
                                                                             Ago           Ago
Strong Buy                11                              9                    8             9
Buy                       14                             15                   15            15
Hold                       4                              5                    5             4
Sell                       1                              1                    1             1
Strong Sell                0                              0                    0             0

VIII. Analysis of Risk
Sprint Nextel is traded on the NYSE with the ticker symbol “S”. The average trading
volume for Sprint Nextel over the past 3 months is $ 18,577,900. The share price had a
52-week low of $21.57 and high of $27.20. The current beta of Sprint Nextel is measured
at 1.36 according to http://www.moneycentral.com.

IX. Fundamental Valuation

1. Estimation of Required Rate of Return
I constructed a regression analysis between the monthly market premium and Sprint
Nextel’s monthly returns above the risk-free rate for last 10 years, I received beta of 1.06.


Correlation between S and S&P500 (Beta = 1.06)
                                              0.4

                                              0.3

                                              0.2

                                              0.1

                                                0
                         -0.3   -0.2   -0.1          0        0.1   0.2   0.3   0.4
                                              -0.1

                                              -0.2

                                              -0.3

                                              -0.4              Y= 1.06x + 0.004
For the purpose of normalizing the beta for stock valuation methods, a beta of 1.21 will
be used since it is the arithmetic mean of the two estimated beta values.

Re = Rf + B(Equity Risk Premium)

Re = .0486+1.21(.11-.0486) = 12.28%


2. Warren Buffet Model with Normal Growth

Re= 12.28%
Owner earnings= $8.05B
Growth rate = 6%
Second Stage Growth rate = 2.5%
Estimated Intrinsic Value= $38.06



3. Warren Buffet Model with Impressive growth

By comparing the revenue figures in fiscal year 2003, 2004, 2005; one can conclude the
following.

2003 sales = 14,185,000
2004 sales = 27,428,000
2005 sales = 34,680,000

Growth rate (2003-2004) = 27,428,000/14,185,000 = 93.3%
Growth rate (2004-2005) = 34,680,000/27,428,000 = 26.4%

Adjusted to 18%

Estimated Intrinsic Value = $86.19
X. Other Considerations

1. Top Institutional Holders

 Holder                                            Shares      % Out         Value
 LEGG MASON INC.                                   170,678,340 6.02          $3,987,046,022
 CAPITAL RESEARCH AND                              141,303,484 4.99          $3,300,849,386
 MANAGEMENT COMPANY
 FMR CORPORATION (FIDELITY                         132,044,098 4.66          $3,084,550,129
 MANAGEMENT & RESEARCH CORP)
 WELLINGTON MANAGEMENT                             125,563,764 4.43          $2,933,169,527
 COMPANY, LLP
 BARCLAYS BANK PLC                                 104,068,260 3.67          $2,474,743,222


2. Conclusion

The Truman Tracy Fund does not currently own any telecommunication stock. Through
empirical data and market analysis Sprint Nextel has proved to be superior to the only
telecommunication company held by the fund in the past.


I believe Sprint Nextel is on the verge of becoming a highly successful firm due to its
leadership’s vision. Sprint Nextel is striving to transfer itself into a true wireless
company, which is where the most growth potential is.



3. Finance Resources

http://finance.yahoo.com
http://www.moneycentral.com
DataMonitor, Business Resource Premiere, University of Missouri – Ellis Library
http://www.sprint.com

				
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