- The Washington Times - Wednesday, July 17, 2002

From combined dispatches

Nextel Communications Inc. reported its first profitable quarter in its 15-year history.

The Reston wireless communications company said it posted a profit of $123 million (37 cents per share) in the second quarter ended June 30 compared with a loss of $369 million (56 cents) a year earlier.

Sales rose to $2.15 billion from $1.72 billion. Per-share figures in both quarters include the payment of preferred dividends.

Paul Saleh, Nextel's chief financial officer, said the company had spent previous years borrowing money to complete the building of its network. With the network now finished, Mr. Saleh said it will cut back on its spending.

Nextel phones, made by Motorola Inc., include a walkie-talkie feature popular among construction crews and financial traders. Nextel boosted sales 25 percent and added 471,000 customers last quarter, even as some analysts forecast that the wireless industry this year will add subscribers at the slowest pace since 1985.

"In a sea of nothing but bad news, this is really the one safety net," said Marilyn Cohen, who holds Nextel bonds in the $100 million of fixed-income assets she oversees at Envision Capital Management. "The fact that they continue to add additional customers is really an attestation to the superior product that they have."

Nextel's average monthly bill was $71 in the recent quarter, up from $68 in the first quarter. U.S. earnings before interest, taxes and depreciation climbed to $816 million from $483 million a year ago. The rate at which customers disconnect, known as churn, was little changed from the first quarter, at 2.1 percent a month.

The company was expected to have a loss of 24 cents last quarter, the average estimate of analysts surveyed by Thomson First Call.

"These guys did way better than I thought they possibly could," said Alex Trofimoff, an analyst at Sanford C. Bernstein & Co., who rates Nextel shares "outperform" and doesn't own them.

Nextel Chief Executive Tim Donahue recruited new chief operating and chief financial officers last year. The trio has beefed up the company's sales force, increased reliance on lower-cost sales methods such as retail stores, and sold more phones to existing customers by emphasizing improved productivity.

"Direct Connect, the two-way radio, is a real success in the marketplace, and it drives a lot of usage," Mr. Donahue said. On average, each customer talked for a record 650 minutes a month last quarter, he said. Thirty-four percent of these minutes were used through Direct Connect, Chief Operating Officer Jim Mooney said in a conference call.

Nextel shares climbed $1.53 to $6.53 on Nasdaq yesterday. They had fallen 71 percent in the past year.

Among other local area companies reporting earnings yesterday:

• Gannett Co., publisher of USA Today and 93 other daily newspapers, reported earnings for the second quarter ended June 30 increased 5 percent to $303.9 million ($1.13) compared with $288.9 million ($1.08) a year earlier.

• Media General Inc. of Richmond said profits in the second quarter ended June 30 increased 110 percent to $16.3 million (70 cents) compared with $7.7 million (33 cents) in the 2001 second quarter.

• Capital One Financial Corp. of Falls Church said its earnings in the second quarter ended June 27 rose 37 percent to $213.1 million (92 cents) compared with $155.3 million (70 cents) a year earlier.

•Visual Networks, a Rockville adviser for communications networks and services, said its earnings for the second quarter ended June 30 rose 17 percent to $14.8 million (41 cents) compared with $12.3 million (39 cents) a year earlier.

•James Monroe Bancorp Inc., based in Arlington, said earnings for the second quarter ended June 30 rose 50 percent to $189.8 million (20 cents per share) compared with $126.7 million (16 cents) for the 2001 second quarter.


Marguerite Higgins contributed to this report.


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