Sprint to the Head of the Pack - NOT!!!!!!

Having worked in the telecommunications equipment industry for more than a decade, I have fond memories of my customers, including Sprint. Back in the 1990s I remember our engineers building a product for Sprint when it was planning to roll out an ATM (Asynchronous Transfer Mode) cell-based network called ION. Unfortunately for Sprint, the world went with IP (Internet Protocol) and the ION is in the dustbin of history.

Now to the business of making"larger than life" heros of CEOs by the media.

Back on September 27, 2004, Business Week ran an article titled "Sprint To The Head Of The Pack" that heaped praise on the telecom services provider Sprint.
It says " By following some unusual strategies, the carrier is blowing past competitors....It's a real mover," says analyst Viktor Shvets of Deutsche Bank Securities Inc.....The real prize may come from future services Sprint hopes to offer through the cable partnerships. The company plans to persuade these cable customers to buy Sprint's cutting-edge wireless services. That would include letting customers preview movies on their wireless video phone on the commute home and then place an order to download the movie so it's waiting as they walk in the door.
Take it as a sign of the new Sprint. Lauer and Forsee understand that the winners in telecom won't be those standing idly by. Whether it's launching services -- or perhaps making an acquisition -- the onetime laggard is now in position to lead the way."

Fast forward to 13, 2008. The same Business Week says "Sprint: Still a World of Pain. The article reveals that "the mobile-phone giant's planned turnaround may involve selling off assets to comply with lenders' agreements." Apparently "the customers kept fleeing, revenue fell, and the losses grew, but Sprint Nextel CEO Dan Hesse says the wireless company is starting to make baby steps in its Sisyphean turnaround.....The nation's third-largest cell-phone company said its customer base shrank by more than 1 million during the first three months of 2008. Even worse, those customers who haven't left are spending less each month. All told, the first-quarter results came in shy of analyst forecasts for both revenue and net loss. "

The WSJ reports that "Sprint Nextel Corp. showed signs of recovery in the second quarter as it reduced customer defections, but the struggling telecommunications carrier warned that subscriber losses would climb again. "We have a long way to go," Chief Executive Dan Hesse said in an interview. "We're talking about a nine-inning game, and a quarter's like an inning." The Overland Park, Kan., wireless company swung to a $344 million loss, compared with year-ago net income of $19 million. Revenue fell 11% to $9.06 billion. Sprint lost 776,000 "postpaid" subscribers to end the quarter with 38.9 million postpaid and 51.9 million total subscribers."

The business media and the popular press can serve society better if they did not give too much credit to the CEOs when their companies does well, because corporate performance depends on many variables. Of course, the CEOs leave with a nice package even when they perform poorly, so they never really have to "take the blame" when things go sour.

Business of Predicting Business- Business Week and Fannie and Freddie

I am going through my old Business Week magazines and looking at what the magazine predicted and what has actually transpired.

• Fannie and Freddie: September 27, 2004. Just How Risky Are Fannie and Freddie?
  

Excerpt: Not everyone is as worried as Greenspan and Snow -- particularly R. Glenn Hubbard, President George W. Bush's former chief economist. In a 33-page study that Fannie Mae commissioned and made available to BusinessWeek before publication, Hubbard, who now heads the Columbia Business School, argues that Fannie is no riskier than the 10 largest commercial banks or their holding companies. Hubbard also concludes that Fannie's capital reserve -- the cushion that financial institutions need in case of emergency -- is adequate.

Why does this matter? Fannie Chairman and CEO Franklin D. Raines will use the report to rebut critics who charge that Fannie's low borrowing costs represent an implicit federal subsidy created by debtholders' confidence that the government will rescue them in a financial crisis. Hubbard's work will bolster Raines' argument that Fannie has a cost advantage because it's low-risk. In the study's foreword, Raines writes that Hubbard "confirms the low-risk nature of Fannie Mae's business but also...indicates a fundamental flaw in studies that purport to quantify an 'implicit subsidy' to the company." Hubbard says: "That's Frank Raines's view."

The current turmoil in the credit markets and the bailout of Fannie and Freddie proposed by Mr. Paulson, to be authorized by the Congress and signed by the President is the verdict on Hubbard's opinion and the BW article.

The Onus of Promoting an "Ownership Society," and Business Week Predictions

As I was going through my old collection of business magazines, I came across the following articles from Business Week:

A Prescription For Health-Care Reform (9/20/2004). Glenn Hubbard wrote that "An "Ownership Society" agenda has taken center stage in President George W. Bush's agenda for a second term, with proposals for Personal Accounts in Social Security, expanded incentives to save for retirement, and Personal Reemployment Accounts to aid workers in finding a new job. But a central plank of this agenda, and one that can be enhanced to improve markets for health care, is already law: the Health Savings Accounts (HSAs) passed in the recent Medicare reform." Nearly four years later, none of the three proposals put forth by Dr. Hubbard have seen the light of the day; in fact they have been dead for a while. It is rather scary to think of the consequences if people had put their "Personal Accounts" funds into the equity market as it was reaching a top, only to see the sharp downturn due to the credit crisis.

The September 20, 2004 Business Week issue had an article on tax code titled "What A "Fairer" Tax Code Might Look Like: A reelected Bush may rework the existing system -- or try for a consumption tax. " It says that "President George W. Bush has the tax code back in his sights -- but this time he's not just talking about tax cuts. In his Sept. 2 speech to the Republican National Convention and on the stump since, he has called for making the tax system "fairer, simpler, and more pro-growth" than the current 'complicated mess.' "
Another rosy forecast for a second Bush term. This forecast proved to be very taxing.

America's Stark Fiscal Choice. Another article in the same issue says that "While President Bush's soaring campaign rhetoric promises Americans that they can have it all -- new and expanded tax credits for private health, savings, and retirement accounts plus big permanent tax cuts -- the reality is beginning to bite. The cost of these ambitious plans, on top of committed expenditures for the new Medicare drug benefit, the war in Iraq, homeland security, agriculture, energy, highways, education, and more, will add trillions of dollars to a federal budget deficit already spinning out of control. Responsible Republicans are beginning to say that Bush must make a choice between his radical plan to change Social Security, health care, and savings programs and making his first-term tax cuts permanent. The wise choice would be to go with entitlement reform. America is facing a severe crisis as its health-care system cracks and the baby boomers approach retirement. "

The "business" publications like BW and WSJ painted such a rosy forecast of the Bush second term- however the results speak for themselves. Perhaps the greatest disaster Bush's eight years have wreaked is the creation and destruction of hopes and dreams in millions of people, both in the U.S. and abroad- especially that of home ownership. Prudent progress towards it was derailed by the financial innovators, the Fed, and the Government.