Pessimism has also shown up in Sprint’s stock price. Shares had lost 22% since late August, before coming back to down about 7% at last Friday’s close. But for the past 12 months the stock price is down 23%.
So now the company’s new chief financial officer, Tarek Robbiati, said he plans to reduce operating costs by 10% for a savings of $2 billion, and he has identified another $500 million in cuts to spending on equipment. The cuts are expected to occur over the next six months.
Sprint’s problem is that it is being out-competed by T-Mobile for new subscribers, and cutting spending on equipment will do nothing to help Sprint improve its wireless service. The first indication of the drive to cut costs was the company’s recent announcement that it would not participate in the next spectrum auction.
As for customers, Sprint’s attacks on T-Mobile have come in the form of low prices. Recall the $1-a-month iPhone leasing plan.
Investors look at the cost-cutting and see a company that may lose its capacity to compete even faster than it already has. Sprint is playing for time, and why? Likely in hopes of a merger or buyout. And until an offer comes knocking, the company will continue to tread water, and the shorts will continue to pile in, expecting nothing but more bad news.
Sprint’s shares closed at $4.47 on Friday in a 52-week range of $3.10 to $6.30. The consensus price target on the stock is $7.28.
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