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Feb
29
How stupid can someone be? Can corporate someones be? I don’t know but when a non-business-y person like me can tell you that you just don’t to this, I know I’m right to slam people for suggesting that running education should be treated like running a business, or running our government should be like running a corporation. Because the biggest, at one time most prosperous companies screw up royally in the name of profit and prestige rather predictably.
From the Washington Post, the numbers:
Sprint’s earnings report yesterday laid bare the historic nature of the loss. The company’s $29.45 billion ($10.36 per share) fourth-quarter loss compared with a profit of $261 million (9 cents) in the fourth quarter of 2006. It was the fifth-largest quarterly loss by a company in the Standard & Poor’s 500-stock index since 1990, according to Bloomberg. Sales were $9.85 billion, down 6 percent.
For the full year, Sprint lost $29.58 billion ($10.31), compared with a profit of $1.33 billion (45 cents) in 2006. Sales fell slightly, to $40.15 billion.
Sprint’s stock has lost a third of its value this year. Yesterday, shares closed at $8.09, down 86 cents.
In the past two months, [Chief executive Daniel R.] Hesse has cut 4,000 jobs, let go three senior executives, closed 125 retail shops, and agreed to add an activist shareholder, Ralph Whitworth, to the company’s board.
The explanation for the numbers:
The nation’s third-largest wireless carrier last year courted people with poor credit to boost its number of subscribers. Now the company is feeling the pain disproportionately as the economy weakens and consumers default on their debts.
Sprint said it expects 1.2 million wireless subscribers to drop their service in the current quarter, roughly the same number that left in all of 2007. The company offset losses by signing up new customers, but it has steadily lost ground to its two main rivals, Verizon Wireless and AT&T.
The loss of subscribers is projected to continue well past March. Chief executive Daniel R. Hesse, who took over in December, said Sprint’s problems were more serious than he had anticipated and would take time to fix.
…
He said the company loosened its credit requirements last summer to attract customers with poor or little credit histories. Sprint ended the year with 53.8 million total subscribers, 700,000 more than it had in 2006. It made up for the loss of core monthly contract subscribers by adding less-lucrative prepaid and wholesale accounts.
“We have a lot of subprime customers in our customer base and we were disproportionately hit hard versus other carriers,” Hesse said.
Oy.
By Jill Miller Zimon at 5:55 pm February 29th, 2008 in Business, Economy, Tech
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7 Responses to “Sprint blames its subprime subscribers for $30 billion loss”
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I love how people who can’t afford a house spend money on cell phones, cable and high speed net. I say we cease teaching algebra, geometry and other forms of math in our high schools to the majority of students. Spend three years on personal finance mathematics such as interest rates, credit cards, check books and investing.
Well – there’s no doubt that people should know their limits. But in the case of Sprint, they are admitting that they solicited and accepted people who never should have been given contracts.
Situations like this with Sprint do not surprise me, we do have people that have trouble discerning between what you can do and what you should do. Bad governance is what I see, from the merger with Nextel to the decision to lower credit qualifications of customers.
The Nextel merger did not make sense, leads me to think that the corporation is preoccupied with bigger is better. The merger made them the third largest but they had nothing in common conflicting technologies and markets. The lowering of credit qualifications looks like a desperate attempt to keep the customer count up, it all looks reckless.
“People that think government should be run like a business” what the heck I thought after I read that. Too simple…too general each scenario requires it own unique approach, however certain functional aspect are shared and could be dealt with similarly.
Bad decisions made to sound good apposed to having the ability to manage and direct and to produce measurable results. This scenario if anything is a corporation behaving as government selling ideas ands initiating events with out any consideration of the outcomes, look we grew, look we have more customers, big and dysfunctional… sound familiar.
As a proponent of running government like a business, I don’t see how the mismanagement and blundering of one corporate entity totally contradicts the theory of running government more like a business.
Running a government like a successful business means streamlining operations, cutting out red tape and massive bureaucracy and treating taxpayer dollars with the respect it rightfully deserves.
Shareholders expect the operation of a corporation to eventually yield dividends and an overall healthy return on their investment. Taxpayers should expect very much the same from their tax payments.
Well stated Brian. Another point to consider is the government and government entities (like schools) don’t have the fear of going out of business like a private industry. This allows for insane choices and plans by decision makers who are not held accountable by the markets. The key to this whole thing is that the government should not bail out failed businesses. These clowns who want to bail out banks from this “mortgage crisis” are absurd. The banks made bad loans, they should pay the consequences. Market forces.
In many respects, corporate subsidies are unquestionably absurd. Amtrak should just go out of business already–no one rides it. The airline industry should be forced to compete without handouts from Congress. For a while anyway, budget airlines like Southwest and JetBlue were able to churn a profit without the subsidies that United, American, and Delta have come to expect.
But when we start talking about the banking industry, we have to be very careful. Banks, after all, are the fuel to the economy in making credit lending available.If we simply allow Citibank, for instance, to close its doors, we’re brewing absolute chaos. Massive bank closures across the country are what accelerated The Great Depression into the decade-long hardship it became. The population must have confidence in its banking system at all times, otherwise they line up down the street each morning to cash out their deposits. That devastates the economy in a way we haven’t experience since The Great Depression.
And if defense of the banking industry in a way, the loans weren’t all that bad. Real estate prices across the country were skyrocketing and there really wasn’t any reason to think the end was in sight. If they had to foreclose on a homeowner, then would simply foreclose in a few years and recoup a lot of what they lost in the mortgage anyway. Now, not all banks acted this way. There’s no question predatory lending practices were occurring but these banks were helping to drive a very healthy real estate market. They shouldn’t be penalized for it. This wasn’t even as bad as the speculation that occurs on Wall Street on a daily basis.
[...] we’ll see any adjustments based on credit problems like Sprint had a couple of months ago (they blamed subprime subscribers for the company’s $30 billion loss)? function [...]