PR News recently published a story titled "Ticker Shock: Five Strategies That Move the Stock Price Needle" (8/1/2011 issue). It's safe to say that executives at Sprint Nextel missed it. On Friday, Oct. 7, the embattled company—which has seen its stock tumble 83% since CEO Dan Hesse took over the reigns in 2007—held an investor call that was described by one analyst as "ugly." That could be an understatement, as after the meeting at least seven analysts cut their ratings on the stock. Why? Because Hesse and his executive team failed to answer key questions that the analysts posed to them. For example, Hesse was asked about the future costs of selling Apple Inc.’s iPhone, which will have a huge bearing on future earnings. Sprint didn't have the information.
So how could such a large organization, with plenty of IR/financial commas help, botch such an important call? It's simple, says Gene Marbach, group VP at Makovsky + Company. "Do you have a monologue, or do you have a dialogue? Spouting information that stakeholders are not interested in and failing to provide data that they want is a huge mistake," says Marbach.
That's why it's important to take a few hours and call key analysts long before earnings conferences, to find out what is on their minds. It's obvious Sprint failed in that regard. So now it's damage control time, with Sprint admitting it was wrong not to have the needed analyst info. Marbach bets that for the next quarterly call, Hesse will man up and apologize for the oversight. "There will be some hostility," says Marbach. "But there has to be some repentance to gain back stakeholder trust."
That may almost be too late. “They have a real credibility problem right now,” said Scott Dinsdale, a high-yield bond analyst at Montpelier, Vermont-based KDP Investment Advisors, to Bloomberg Businessweek. “We were really positive on management beforehand because they’ve done a really good job of navigating the company through a lot of pitfalls. Now I feel like they’ve got an incomplete plan.”
Not good for a company that, as one analyst said, is on "thin ice."