Nextel Communications on Wednesday became the latest tech company to tell investors that its next quarter will not look good.
The wireless service company announced that first-quarter domestic
operating cash flow will be 15 percent less than the fourth quarter's
$418 million. Nextel also predicted it will add 500,000 new domestic
subscribers during the quarter, compared with 521,200 the company added in
the previous quarter.
The Reston, Va.-based company attributed the shortfall to a slowing
economy. "Our domestic operations have begun to feel the impact of a
slowing economy and related cost control measures being implemented by
many businesses," Nextel CEO Tim Donahue said in a
statement. Donahue added that the company is also focusing on cost cutting.
Investors hammered shares of Nextel, which closed down $5.81, or 28
percent, at $14.63 on a volume of 84.4 million shares, nearly eight
times more than the stock's average daily volume of about 11 million
shares. The stock also traded as low as $12.75, a new 52-week low
compared with its high of $82.93 over the same period.
In its fourth-quarter earnings release, the company had expected cash
flow for fiscal year 2001 to increase between 50 percent and 65 percent,
but it also cautioned investors that domestic cash flow might fall
sequentially in the first quarter because of higher operating expenses.
But the gloomy economy also adds more uncertainty to the equation.
"Investors are thinking, 'If (the warning) is truly due to a slowing
economy, then when will Nextel start to benefit from a robust economy
that has turned around?'" said Frank Marsala, an analyst at ING Barings.
Nextel is not the only wireless company to warn of rocky times ahead.
Mobile phone maker Ericsson announced this week that first-quarter sales
would be flat or slightly lower instead of rising 15 percent as
previously expected and that sales of mobile phones would be lower than
last year's first quarter.
Motorola also said Tuesday that it plans to cut 7,000 jobs in its global
cell phone unit to reduce costs in its wireless handset business during
a time of sluggish sales.
Many industry watchers expect that more people will use cell phones and
wireless services over the long term. A recent study optimistically suggests
that one in four people will have a phone by 2006.
However, this year may be a nasty speed bump on the way to better growth
as the economic slowdown runs its course through the