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Another take on Sprint's lack of Networx

I mentioned some of the Networx buzz earlier this week. Well, here is more on the Networx contract, specifically how big of a deal it is for Sprint Nextex that the company didn't make the cut... this from Forbes.com's Dan Frommer:

It's another black eye for Gary Forsee's wireless giant. But it's not a disaster...

Sprint Nextel, an incumbent supplier to the government, was a surprise cut -- the latest in a series of bad news for Forsee and Sprint investors.

"If the company was doing fine otherwise, it wouldn't be a blip," says Joseph Bonner, analyst with Argus Research. "But add it to everything else, and it's another negative for Sprint."

Still, it's not a total wash. The Networx Universal contracts could add up to $48 billion over ten years, but could easily total only half that amount. Because the telcos must compete on pricing to win, the service contracts may not be as profitable as many other lines of business, Bonner says.

Last year, Sprint did $324.6 million worth of business through existing government telecom deals. But that's not even 1% of Sprint's overall revenue: the company's 2006 sales topped $41 billion. And its actual revenue loss could be much smaller: the GSA boasts that contract prices will be better -- as in, cheaper -- for comparable services than existing contracts.

And then, of course, there is Networx Enterprise coming next month.

In May, the government will announce winners of a second contract pool, called Networx Enterprise, to which Sprint could win access. These telecom contracts include high-capacity fiber optic infrastructure and services like voice-over-Internet Protocol and Internet Protocol television.

The issue for Sprint Nextel is that Enterprise suddenly becomes a must-win, so if the pricing issue was the issue, it probably will not be for Enterprise.

Ah, competition.

Posted by Christopher Dorobek on Apr 05, 2007 at 12:16 PM


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