Sprint Nextel Corp. said on Monday Chief Operating Officer Len Lauer was leaving the company and his responsibilities would be assumed by Chief Executive Gary Forsee amid moves to improve the company's performance after two quarters that disappointed investors.
Sprint, the No. 3 U.S. wireless provider, said in a statement that the COO position would not be filled. Analysts said Lauer had likely been pushed out as a result of the company's recent weaker-than-expected growth.
I think he's clearly being made a scapegoat for a good portion of (Sprint's) operational stumbles - He was pretty clearly fired, said Stifel Nicolaus analyst Chris King.
King said he was concerned about what the change bodes for this quarter's performance. Investors will also be disappointed if there are not more changes, he added.
A spokesman said that there were no more executive departure announcements planned.
This change was made as the company seeks to improve its execution and accelerate the pace of transition, said Bill White, Sprint senior vice president of corporate communications.
Sprint Nextel's stock has declined 30 percent this year, and earlier this month it posted lower quarterly earnings as it had costs from acquiring Nextel. It also added fewer new customers than expected and it cut its growth forecast for the year.
Standard & Poor's later lowered its rating one level on Sprint Nextel's unsecured debt to BBB-plus from A-minus, citing the company's operational weakness and the stock buyback plan.
Surterre Research analyst Todd Rethemeier said the move could reassure some investors, who are looking for changes, but said it was not clear whether having the CEO also look after operations at such a big company made sense.
I think it's a good first step. They needed a change there and the chief operating officer is an easy place to start, he said noting that some of Sprint's recent problems stemmed from a weak marketing message. But he said more changes could be necessary.
Sprint's White defended Forsee's ability to run the company's operations especially after having done so for more than a year after he took the CEO job at Sprint. Clearly the board is comfortable that Gary is leading as CEO and leading our operations, White said.
But King said Forsee, who took the helm at Sprint in 2003 and oversaw the $35 billion acquisition of Nextel Communications in August 2005, could draw investor ire.
I'm always a bit skeptical when the CEO puts a significant amount of the blame on somebody else because ultimately the buck stops with the CEO, King said. It might open the door for some criticism of Gary Forsee if this is the only change he winds up making.
TELECOMS VETERAN DEPARTS
Lauer joined Sprint in 1998 after spending five years at Bell Atlantic, which is now part of Verizon Communications (VZ.N: Quote, Profile, Research). He served as president of Sprint's business and consumer units before he was appointed the COO role in 2003.
Len Lauer is very well respected in the telecoms community, King said, noting investors saw Lauer as playing an integral role in turning Sprint around when it faced similar problems with customer retention around 2002 and 2003.
Lauer served as president and CEO of Bell Atlantic New Jersey for his last three years at the company and prior to 1992 he spent 13 years at International Business Machines in a variety of management roles in marketing and sales.