Greg's Bite: Sprint and ClearWire -- Apple takeover targets?
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Greg's Bite: Sprint and ClearWire -- Apple takeover targets?

By Greg Mills

Apple finally condescended to grant Sprint the iPhone in a deal that rocked Wall Street. Sprint is betting the farm that selling the iPhone will pull the third string US carrier out of the dumps and back into the big time. Apple and Sprint both seem to be quite confidant that simply having iPhones available for its customer base will turn the company around.

That might be true if the company lasts that long. Sprint is stone broke and mismanaged, running in all directions at once. They need a firm hand at the helm and don't have one. Making an agreement with Apple to buy 30,500,000 iPhones over the next four years at a cost of US$20 billion is rather rich considering the current market cap for Sprint is only $7 billion. Not only is the Apple deal too rich for Sprint, they recently announced that they intend to build out a new LTE G4 network that will cost them money they just don't have. Confidence in Sprint's management is the problem with the low valuation.

The problem at Sprint is simply bad management at the highest levels. There is nothing wrong with the spectrum or cellular network Sprint operates. ClearWire may have built out the wrong flavor of cellular technology, but that network can be converted to LTE 4G for peanuts by someone with cash. C;earWire is close to bankruptcy and Sprint is not helping. (See .)

Sprint's (S) NASDAQ, market cap has shrunk to $7.2 billion and ClearWire (CLWR) NASDAQ, has shrunk to $1.27 billion as of the close of the market Friday. Clearly, someone with cash and an ability to focus could snatch Sprint out of the dust bin and fix the company. Sprint stock has fallen from a high of nearly $75 per share in October of 1999 to close at $2.41 Friday. ClearWire has fallen from a high of $32.50 in July, 2007 to $1.39 Friday.

Sprint continues a freefall to $2.20 per share and the sprint market cap has fallen to 6.6 Billion US. Sprint stock set a new 52 week low at $2.10 and rebounded slightly.

I submit that Sprint and ClearWire have gotten so cheap they amount to chump change for Apple or Google and ought to be bought out. The spectrum the two cell companies own alone is enough to justify the expenditure. I am convinced the problem at Sprint is upper management that can't devise and stick to a business plan that works.

Sprint bought the Nextel network some years ago and the merger was nothing short of a disaster. The two networks were incompatible electronically as was the focus of the consumer-oriented Sprint and the business-oriented Nextel. Sprint customer service was so bad a few years ago customers were leaving in droves.

Not having the iPhone wasn't the issue; it was rude customer service and service account rules that made consumer feel like chumps for ever having signed a contract with them. Rumors are that Sprint finally recognized that problem and has moved to fix it. I can not confirm that since I am still angry with Sprint five years down the road.

If Apple were to takeover sprint and ClearWire, fire everyone from the janitorial staff up and put strong business managers in place, a further investment over the next two years of $5 billion or so for a total investment of roughly $15 billion, Apple could own a strong network in the US. Renaming Sprint the Apple Cellular Network would reverse the fortunes of the company overnight and likely return the investment in the form of a dramatically increased market cap for Sprint and ClearWire in a matter of days. I think Sprint stock would soar if Apple took them over, as everyone knows what is wrong with Sprint.

That Apple is interested in running a cellular network comes from an interesting source. Tony Fadel holds an Apple patent where he conjures up a virtual cellular network that uses excess cellular capacity that can be purchased for chump change from the existing cellular networks and then resold through the iTunes store. Buying and renaming Sprint "Apple Cellular" is a much better idea.

Apple management has taken some criticism for hoarding more money that the US government. They contend that they will make "strategic purchases" when the time is right. The time is right to buy the third largest US cellular network outright for less than what Apple now makes in net profit in just three months' time. There are interesting ways to buy a major company that doesn't require all cash. I think Apple ought to move on Sprint and ClearWire before Google snatches them away.

That is Greg's Bite.


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