- The Washington Times - Tuesday, September 24, 2002

Nextel Communications Inc. stock recovered slightly yesterday after dropping last week on the heels of the resignation of the company's chief operating officer.

The stock closed yesterday at $7.19, up 19 cents from Friday, when shares fell $1.30 after news that COO James Mooney had resigned.

Tim Donahue, chief executive and president of the Reston-based wireless-communications provider, will take over the post until Mr. Mooney, who is leaving for personal reasons, is replaced, said company spokeswoman Audrey Schaefer.

"We are operating on a business plan that had already been set in motion," Ms. Schaefer said. "The company is looking to move forward and establish some of our goals we set," such as operating on a free cash flow basis by 2004.

Patrick Comack, a telecommunications analyst with Guzman & Co. in Miami, rated the stock as a high "buy" despite the resignation, citing the company's low subscriber-cancellation rate and a growth in average revenue per customer at $71.

"They have a deeply entrenched customer base that's made up of mostly business customers, and have a 75 percent penetration in the Fortune 500 companies," Mr. Comack said. "They are getting enough momentum and size to carry the balance sheets."

Nextel reported a 41 percent rise in profit in the second quarter, ended June 30, to $580 million (40 cents a share), compared with $411 million (39 cents) a year earlier.

But that momentum was interrupted by Mr. Mooney's upcoming departure this month, said Vik Grover, an analyst.

"Investors initially are scared when a high-level official leaves the company," said Mr. Grover, with Kaufman Bros. LP in New York. "I heard that he butted heads with some of the other executives. But with the little information that was given, a lot of people could have seen it as something shady going on in the financial department and panicked."

Mr. Grover said he put the stock on a "hold" rating, saying the company had work to do on its long-term operations plan.

Nextel's lack of a 3G migration system, a third-generation wireless-networks system used by AT&T, MCI and Sprint, leaves the company vulnerable to wireless companies that would "spirit away Nextel's more lucrative subscribers using direct connect," its walkie-talkie cellular-phone service, Mr. Grover said.

"Plus, the company is racing against the clock to pay back debt that will amortize in November of 2003 without a clear plan," he said.

William Power, a senior research analyst, countered that Nextel had repaid $1.83 billion in debt this year, and said that his brokerage firm, Robert W. Baird & Co. in Milwaukee, was forecasting that the company would operate on free cash flow by 2003.

"Nextel has a differentiated product and is hitting high growth levels in their subscriber base," Mr. Power said, rating the stock as a strong "buy."

"We are projecting conservatively that the company will collect $819 million in revenue, but I expect that number to be far higher by then," he said.

Mr. Comack said that while investor confidence remained weak, he expected a resurgence in buying within the next month.

"This is a relatively cheap stock from a company that is outpacing its peers in the telecommunications market, so investors are going to get over their initial fears and get back on board."

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