Sprint Board, Under Pressure from Activist Investor, Steps Up CEO Search

Sprint is seeking a replacement for Chief Executive Gary Forsee, just two years after he engineered the $35 billion purchase of cellular operator Nextel Communications Inc., according to a report in the Wall Street Journal. (subscription required)

Sprint board members hope to announce the company's new leader by early December, the paper reported. The incoming CEO is expected to be an outsider. Certain high-profile telecom-industry veterans have been approached, and at least one of them has declined to be considered, according to the report.

The 57-year-old Mr. Forsee, who has led Sprint since 2003 and has been chairman since late last year, had tried to calm restive investors by taking several steps. During the past few months, he made investments aimed at improving the company's creaky phone network and customer service, revamped its advertising and outlined new initiatives related to the creation of a high-speed wireless network using the new WiMax technology.

Yesterday the Wall Street Journal reported that activist investor Ralph Whitworth, was pushing for the ouster of the executive. “We have lost confidence in Gary Forsee,”  he told the paper. He threatened a proxy fight for an undisclosed number of board seats unless Sprint directors “immediately” deal with the company’s leadership. Whitworth has questioned Sprint’s investment in a wireless-broadband technology called Wi-Max and asserts that the company has lost focus on its core cellphone business.

In an interview with Directorship [“Whitworth: The Alchemist in the Boardroom,” June/July 2007], the activist said he is highly focused on a specific type of investment, typically companies in mature industries that are, or have been, profitable and are underperforming relative to their peers and their potential.

 “Generally the first indication is a history in the financial data of spending money in a way that doesn’t get adequate returns for the investor,” Whitworth told Directorship. “Sure, the company is still profitable and holds a defensible position in its industry with good products, but the question is, how are they spending the profits they make from that? Those are the ones we end up focusing on.”