Marketplace: Sprint's Dazzling Presentation Underwhelms
By SETH SCHIESEL
When the Sprint Corp. decided to whip up attention for a planned new communications network, it followed a careful plan.
Once at the theater, Sprint's guests were treated to a dazzling multimedia display that included a cutaway replica of a technology-energized house on stage.
Despite the buildup, Sprint's stock rose just 50 cents on Tuesday, to close at $72.4375.
The underwhelming response from investors largely reflected the missing details, in terms of technology and business plan, from the company's presentation. Besides, the shares had already had a strong run-up this year, rising 24 percent to trade at 41 times estimated earnings, mainly on speculation that Sprint would soon be acquired soon, perhaps by a local telephone company.
At the presentation, Sprint held up its new system as the telecommunications equivalent of the Cuisinart, the essential tool of the future that could do just about anything. The company said the service would allow people to talk on the phone, send and receive video images, surf the Internet and get high-speed data access through a single existing connection.
But it said little about how consumers would reach this technological nirvana (in the second half of next year, when the company plans to make the service available to homes).
It did explain how it is upgrading its long-distance, or "backbone," network to use an advanced technology called asynchronous transfer mode. But every-day users do not see backbones. They see the small tendrils of a network that actually reach into their homes and offices. And Sprint explained little about those tendrils' technical anatomy.
People close to the company say it is negotiating with the regional Bell companies, in particular Bell Atlantic and SBC Communications Inc., to cooperate on high-speed local connections. Tuesday, Sprint said only that it was talking to local carriers of all sorts about a variety of subjects.
"This is a highly complex announcement," said Howard Anderson, managing director of the Yankee Group, a high technology consulting firm based in Boston. "Well, it's not really an announcement. It's a statement of direction."
Jeffrey Kagan, a telecommunications stock analyst in Marietta, Ga., put it differently.
"Sprint has done a remarkable job of positioning this announcement as earth-shaking," he said. "I haven't seen this much hype around a pre-announcement since Windows 95. My hat's off to Sprint's marketing team."
It seemed to work for a while. Sprint's stock had closed on Monday at $71.9375. Shortly after 11 a.m. on Tuesday, the shares the shares were up almost $2, trading at $73.875. But by the the time the presentation finished at noon, they had fallen back to $72.75.
Surely, part of the decline resulted from the company's statement that the new venture would dilute earnings through 2000. Sprint said it would spend $400 million on the system over the next few years.
The new network may indeed change the industry. But that was not obvious on Tuesday, especially given that many of Sprint's competitors had made similar assertions. Big telecommunications companies these days are rushing to offer an integrated package of voice, data and video services.
Benjamin Scott, chairman of IXC Communications Inc., which is building a fiber optic network, remarke, "It's a great validation of our strategy and we're ahead in implementing it."
William Reddersen, a group president at the BellSouth Corp., said, "Sprint's national backbone network reinforces what BellSouth has been doing at the local level for the last four years."
Frank Ianna, who runs the AT&T Corp.'s national network, said, "Our basic reaction is that a lot of what he said is nothing new."
Joseph Clayton, chief executive of the Frontier Corp., reacted with more skepticism yet. "It's vaporware," he said. "Where's the beef on this deal?"
Wednesday, June 3, 1998
Copyright 1998 The New York Times
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