In the wake of yet another poor earnings report, Sprint is laying off thousands of workers. The telecom giant said it would cut loose about 2,000 workers as part of a cost-cutting program that aims to turn around the ailing company.
In summary, Sprint reported operating revenues of $8.5 billion for its second fiscal quarter of 2014, which represents a $192 million operating loss. Marcelo Claure, the company’s newly-minted CEO, has been pushing out aggressive rate cuts on its smartphone plans, but is now turning to headcount cuts. All told, the company expects the layoffs to slash its labor costs $400 million annually. The cuts include internal and external labor.
“We have started a transformational journey,” said Claure. “While the company continues to face headwinds, we have begun the first phase of our plan and are encouraged with the early results. Every day we are focused on improving our standing with consumers, improving our network and controlling our costs.”
Sprint Needs Time
Of course, layoffs don’t guarantee success in upcoming quarters but slashing thousands of jobs is not atypical for a CEO who comes in with a turnaround mandate. While the results of the most recent quarter don’t look terrific, independent technology analyst Jeff Kagan told us Sprint is indeed in the early stages of its transformational journey.
“After listening to this quarter’s earnings call, CEO Claure Marcelo said they are in the process of creating a new growth strategy going forward,” Kagan said. “Based on all the change the company has gone through over the last year with new ownership, a new CEO in recent months and crafting a new strategy, it’s important to give them the space they need to change.”
Kagan reminded that Sprint has struggled for years and stressed how important it is to give Sprint’s new leadership the room it needs to transform the company. He compared Sprint’s situation to HP hiring Meg Whitman as CEO to turn around the technology giant.
“The marketplace knows it will take several years to turn that company around,” Kagan said. “The marketplace should be ready to give Sprint the same room to turn itself around as it is giving to HP. I still believe the marketplace would be better and stronger with four, strong, growing competitors and I hope Sprint can make this happen.”
More Changes Ahead
In the earnings call, Claure made it crystal clear that he’s looking at the business “from end to end.” He promised investors that every dollar is “being closely scrutinized.” Part of that scrutiny is on the executive team. “We’ve decided to make some leadership changes,” Claure said. “More changes are coming.”
Last week, Sprint announced Junichi Miyakawa as its technical chief operating officer, a newly created position. Coming over from Softbank, Sprint’s parent company, Miyakawa will oversee the company’s network and technology organization, including related strategy, network operations and performance. He will also lead its relationships with key network equipment vendors.
“Miyakawa-san transformed the SoftBank network in Japan and I’m confident that his expertise and leadership will help us do the same thing for Sprint customers,” said Claure. “We already have made substantial progress on the Sprint network and it is performing better every day. He will work directly with our network team as we continue to build out our network to take advantage of our strong and unique spectrum position.”
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