Sprint CEO Gary Forsee addresses outsourcing

His comments came during Sprint's annual meeting today

OVERLAND PARK, Kan. -- Sprint Corp. Chairman and CEO Gary Forsee today defended the company's need to find the best suppliers and partners -- sometimes though outsourcing -- as he addressed concerns raised by some disgruntled employees and shareholders worried about potential job losses.

Forsee's comments came at Sprint's annual meeting here on the same day that rival MCI Inc. (formerly known as WorldCom Inc.) officially exited bankruptcy, potentially producing a more competitive telecommunications marketplace and one in which outsourcing or offshoring of Sprint jobs could play a more important role.

"Outsourcing allows Sprint to find suppliers with experience in certain areas," Forsee said, even as he acknowledged that outsourcing has become heavily "politicized" and expressed sympathy with the concerns of displaced workers.

But in comments to reporters later, Forsee said Sprint workers who are also members of labor unions sometimes overlook the fact that outsourcing doesn't always mean jobs are lost. For example, he said, although Sprint has reduced its workforce by about 5,000 jobs in the past year, bringing it down to 65,000, many of those outsourced workers still work with other companies.

Many of the 5,000 job reductions were the result of early retirements, a Sprint spokeswoman said.

Last fall, Sprint outsourced 900 IT-related positions, but nearly all the workers went to work in similar jobs for IBM or Electronic Data Systems Corp., Forsee said.

Several members of the Communications Workers of America (CWA) rose at the meeting to support a proxy-statement motion calling for a study of the impact of outsourcing. The motion was defeated, with only 10% of shareholders supporting it.

In February, Sprint announced the outsourcing of many call center functions, apparently adding to workers' concerns. Jimmy Gurganus, vice president of telecommunications at the Washington-based CWA, said that one reason for the outsourcing study was to learn more about whether corporations keep the outsourcing of jobs "secret." He didn't specifically say Sprint has kept its outsourcing plans secret, however.

The outsourcing study proposal was one of several on a ballot that included a motion to cap Forsee's annual pay, now put at $16 million when stock options and bonuses are included, and a proposal to appoint an independent chairman to Sprint's board. Both measures failed.

Reporters asked Forsee if MCI's emergence from bankruptcy might raise the prospect of price wars for large corporate customers. Forsee downplayed that idea and stressed that Sprint is doing more than just offering low prices to customers. He cited the ability to have a unified service from Sprint that includes voice, data, wireless and wireline services.

On the topic of whether Sprint might be acquired, Forsee predicted market consolidation, but called Sprint a strong player. He refused to comment on whether other companies have made any bids for Sprint, adding that the company's board would need to evaluate any offers on their long-term value to shareholders.

The fears of Sprint workers about outsourcing had no effect on one Sprint customer, Cerner Corp., a health care IT provider in North Kansas City, Mo., with 6,000 employees that purchases Sprint long-distance and frame-relay services.

"We've got no major concerns with Sprint," said Cara Jiles, director of Cerner's end-user experience. She said the recent Sprint marketing strategy called One Sprint is appealing to her company, which is trying to limit the number of vendors it uses and wants to have one point of contact for all the services it gets from Sprint.

Cerner, however, has moved to protect itself from changes in the telecommunications industry by limiting service contracts to one year. Analysts have said that having short-term contracts is wise, in case a provider is purchased or goes out of business.

Sprint finished 2003 with $26 billion in revenue. Today, it announced first-quarter revenue of $6.7 billion, a 5.8% increase from the same quarter a year ago. Profits reached $714 million, up 18.2% from the first quarter of 2003, when the company posted profits of $604 million. Sprint's net debt stands at $16.4 billion, a source of concern for many analysts, although that number was reduced by $296 million in the first quarter of 2004.

On a related financial note, Sprint on Friday will finalize plans to combine its separate wireless and traditional telecommunications stocks, with the remaining stock called FON. Each share of Sprint PCS Group will be worth one-half of a FON stock.

Copyright © 2004 IDG Communications, Inc.

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