Research firm predicts January layoffs at Sprint Nextel

Are more job cuts on the way for Sprint Nextel Corp.?
After speaking with Sprint Nextel CFO Bob Brust, Pali Research predicts that the carrier will sacrifice employees in order to save a drowning company. The report’s author, Walter Piecyk, said he expects Sprint Nextel to announce a slew of layoffs in January.
And even though it may adversely affect Sprint Nextel’s first-quarter results, Pali Research expects ultimately the move will better position the company to overcome dismal financial estimates for 2009 and 2010.
“We also believe CEO Dan Hesse is preparing to take more dramatic actions to stimulate gross subscriber additions and we do not believe that price cuts are off the table,” Piecyk noted. “With customer care in good shape, more flexible covenants in place and a planned layoff in January, CEO Dan Hesse has the financial flexibility and the organizational structure to make whatever moves he wants in order to stimulate growth.”
However, James Fisher, spokesman for Sprint Nextel, said that price cuts are not likely at this point. And after speaking with Bob Brust this morning, Fisher calls that prediction a “bit of an over-reach.”
“That is the last thing he (Bob Brust) would want to recommend that we do,” Fisher said. “He strongly believes that we use every other tool to attract customers. It’s not to say we would never consider it, but not something that’s being actively discussed right now.”
Further, Piecyk said gross subscriber additions may be a new factor in determining management bonuses under the 2009 short-term incentive plan. In 2008, the short-term incentive plan was mainly driven by churn and customer care, he said.
Pali Research sees cutting employees as a smart move to accompany the other good decision by Sprint Nextel to hire customer care representatives in the U.S., eliminating the need for its customer-care solution that former CEO Gary Forsee established in the Philippines. Piecyk also said it is important for the carrier to quickly replace John Garcia, former head of CDMA, so that CEO Dan Hesse has some help in developing a marketing strategy.
“For the moment, John Garcia’s departure places the responsibility to grow gross additions squarely on Hesse’s shoulders,” the report said. “That would appear to set him up to emerge as the hero or the latest scapegoat.”
Sprint Nextel lost more than 1 million customers in its most recent quarter.
When asked about the job cuts, Fisher said the carrier has not yet completed its 2009 plan and is not in the position to decide what the labor needs will be.
“When the time comes, we’ll look at our needs and how to meet our budget and make a decision as needed,” he said. “We’re not going to take anything off the table, but we’re not at a decision point.”
Article updated Dec. 8 to include comments from Sprint Nextel