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Could Forsee's departure put Sprint's WiMax plans at risk?

Analysts mixed, Sprint says Xohm WiMax is 'business as usual'

October 9, 2007 12:00 PM ET

Computerworld - The biggest long-term impact of Gary Forsee's departure as CEO and chairman of Sprint Nextel Corp. could be on the company's huge WiMax wireless broadband initiative, called Xohm.

Some financial and technology analysts said they believe that Xohm could be in trouble, although not immediately. A new CEO could spin off the business unit or scale it back, they said.

However, other analysts said that Sprint and its investors would be crazy not to capitalize on the huge investment the company already has in licensed 2.5-GHz spectrum to be used for the Xohm network.

Slated for a $5 billion investment by Sprint in coming years, Xohm is supposed to provide 100 million users with wireless broadband service at speeds ranging from 2Mbit/sec. to 4Mbit/sec., starting in a nationwide rollout next year, Forsee told analysts and the press in August.

Sprint Chief Technology Officer Barry West, the president of the Xohm business unit, hailed Xohm at WiMax World in Chicago two weeks ago, noting that Sprint was ready to deploy the broadband wireless technology in initial markets in Washington/Baltimore and Chicago in December -- a timeline that would put Sprint far ahead of competitors such as Verizon Wireless and AT&T Inc.

But partly because of Forsee's inability to successfully integrate Nextel with Sprint and Sprint's continuing problem with customer churn, or loss of cellular subscribers, some analysts have viewed Sprint's enormous investment in Xohm as a distraction from its core business.

One financial analyst, Philip Cusick of Bear Stearns, wrote last week to investors that Sprint should cut its spending for Xohm in half to concentrate on its central cellular and network backbone businesses. He predicted Sprint is "likely" to de-emphasize Xohm, resulting in a slower rollout than West has promised, with the possibility of a delay in the network-building project Sprint is undertaking with Clearwire Corp.

Despite Forsee's departure, Xohm spokesman John Polivka said today that Sprint remains "committed to the WiMax network development and the launch of Xohm mobile Internet service. "It's business as usual for us," he said, adding that Sprint is getting ready for a commercial services launch in the second quarter of 2008.

"There's more momentum than ever, thanks to recent device development commitments, " Polivka added. "We expect to exploit our time-to-market advantage to bring Xohm customers an enhanced mobile broadband experience."

Berge Ayvazian, an analyst at Yankee Group Research Inc. in Boston, said it's expected that Sprint would say the Forsee resignation will have no impact on Xohm.

However, Ayvazian said Sprint's optimism could be thwarted. "My opinion is that any new CEO would take a fresh look at all of the company's initiatives and businesses and establish some priorities." he said. "A new CEO could spin off Xohm, or run it as a strategic initiative" under an executive other than West.

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