Subject: [NEXTEL-1] Nextel Communications: pushing the competition's buttons

From: "Rik Rasmussen" <[email-masked]>
Date: Fri, 23 May 2003 07:21:21 -0400

Company of the Day | Multex Investor

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     Company of the Day By Paul Foglino, Contributing Editor, MultexInvestor

                  Nextel Communications: pushing the competition's buttons
                  23 May 2003

                        Last year was terrific for the wireless company, but
this year will bring increased competition

                       Paul Foglino
                                Contributing Editor
                                MultexInvestor

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                       Get quotes or browse Research for companies mentioned
in this article
                                NXTL
                                NEXTEL COMMUNICATIONS
                                Quote | Research Reports

                        The wireless industry has given investors almost
nothing but static for the last year—except for Nextel Communications
(NXTL), which has made a direct connection. The company's stock price has
increased fivefold from its July 2002 low, while competitors like Sprint PCS
(PCS) and AT&T Wireless (AWE) are trading at roughly last year's prices.
This week, CEO Tim Donahue told analysts that NXTL's business was solid and
that he expects it to stay that way. NXTL's price has risen every day this
week, for a gain of almost 10 percent.

                        Clearly, last year would have been a terrific time
to buy NXTL, but what about now?

                        Nextel's major advantage over its competitors is its
Direct Connect push-to-talk service, which allows users to use their phones
like walkie-talkies. Direct Connect service has helped the company attract
business customers and avoid user turnover; during the coming year, however,
the company will face tough competition as other wireless firms introduce
their own versions of push-to-talk. As a result, expect the company to try
to make stronger inroads into the consumer market to maintain growth. (Click
here for a complete description of Nextel's business.)
                               Continued below

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                        Analyst recommendations are all over the map, from
Buy to Sell and every gradation between. Among independent research firms,
Standard & Poor's rates the stock a Buy, expressing confidence that Nextel
can withstand the competition. Morningstar is less bullish, placing the
stock's fair value at $15, which is close to its current price.
Institutional investors have been favoring NXTL, with institutional
ownership up nearly 12 percent to about 70 percent, more than double the
average for the rest of the industry.

                        Nextel has shown consistent revenue growth for the
past few years and its earnings per share have grown steadily since the firm
went into the black last year. Another plus: Thanks to its business
customers, the company's profit margins are higher than those of the rest of
the industry. On the downside, the high quick ratio and low interest
coverage shown on the financial condition table indicate that debt might
become a problem, although the company has been moving towards reducing debt
recently.

                        Nextel has been a bright spot in a beleaguered
industry. The question for investors is whether the company can defend its
push-to-talk customer base and expand further as the battle for market share
becomes increasingly desperate.

                        About the Author | Email Author

                              Other recent articles from Paul Foglino
                                 Home Depot: building a solid lead over the
competition
                                21 May 2003
                                 Dell Computer: great expectations,
valuation worries
                                17 May 2003

                              More from Paul Foglino

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