NEXTEL
COMMUNICATIONS INC.
Louise Philbrick
David Guerra
Keith Grant
Overview
•
•
•
•
•
Current Condition
Vision and Mission
External Factors
– CPM
– EFE
Internal Factors
– IFE
Analysis
– Key Ratios
– SWOT Matrix
– Space Matrix
– BCG
– IE Matrix
– GSM
– QSPM
Possible Strategies
Recommendations
Evaluation
Nextel Overview
Nextel Communications Inc. is a provider of
communications services with three
operating segments:
• Digital Cellular
– Customers receive crystal clear calls and guaranteed
message delivery in a secure environment, within the
Nextel National Network.
• Walkie-Talkie Services
– Direct Connect®, Nationwide Direct Connect™, and
International Direct Connect™ services allow
communication without having to dial a number.
Nextel Overview
Continued
• Wireless Data Services
– Customers can access the wireless web, e-mail,
instant messages, text messages, and multimedia
messages. They can also customize their phones
with Java™ applications, wallpapers, ring tones, and
alerts with sports, news, and weather information.
Nextel History
• Founded as Fleet Call in April of 1987
• Fleet Call was founded as a two-way radio
service.
• Fleet Call issued their IPO in 1992
• Nextel first recorded profit in 2002
Stock Price Performance
Graphic source:
cbs.marketwatch.com
Nextel Today
•
•
•
•
8.2% Market share
14.1% of new wireless subscribers
Nextel Direct Connect®
Nextel trades on the NASDAQ National
Market under the symbol NXTL
Key Facts
• 95 % of Fortune 500 companies are
Nextel customers
• Currently in 297of the top 300 US markets
• Nextel is tied with Verizon for the lowest
customer churn rate.
• 36% sales growth over the past 5 years
• In 2003 Nextel won the naming rights to
NASCAR racing series
Goals and Objectives
• Provide individualized packages of
wireless services
– combine multiple wireless communication
options in single wireless telephones
• Target Business Customers
– focus on business customers will emanate a
higher monthly average revenue per unit and
lower average monthly service cancellations or
terminations
Goals and Objectives Concluded
• Rapid deployment of robust networks
– create vigorous wireless systems that cover all
key areas of a given market before introduction of
network in that market.
• Operate in Mid-sized and smaller markets
– this strategy would allow Nextel to impulsively
increase penetration within our targeted segment
Vision Statement
Enhancing the diversity of Nextel’s
workforce and promoting an inclusive work
environment to better serve our diverse
employees, customers, suppliers, and
business partners.
Graphic obtained from: Nextel.com
Source: Nextel. COM
Nextel Mission statement
• We will achieve our vision statement by
incorporating inclusion into all that we do.
– Recruiting and retaining a talented, diverse
employee base
– Recognizing and appreciating all employee’s
perspective and talents
– Fostering an environment that enables all
employees to reach their highest potential
– Building diversity awareness throughout the
organization
– Promoting supplier diversity
Source: Nextel. COM
Nationwide Direct Connect®
Coverage
Graphic obtained from: Nextel.com
External Audit
Opportunities
1.
2.
3.
4.
5.
141 million possible investors in Europe, UK, and Germany.
Low P/E ratio which should attract value investors.
Sports marketing can be luring for younger customers.
Growing Hispanic population in the US.
Increased desire for wirelsss service.
Threats
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
New regulatory complaints (new phone # portability).
Rising costs of healthcare.
Global unrest- economic monetary and financial.
Consumer privacy rights being attacked.
Weak Consumer spending.
Decreasing demand for traditional voice lines and fixed lines.
Increasing overlap of telecommunication territories.
Increasing competition for providers of web search directories.
Increasing providers of wireless services.
Brand recognition.
EFE Matrix
External Factor Evaluation Matrix (EFE)
Opportunities
141 million possible investors in Europe, UK, and Germany.
Low P/E ratio which should attract value investors.
Increased desire for wirelsss service.
Growing Hispanic population in the US.
Sports marketing can be luring for younger customers.
Weight Rating Weighted Score
0.06
1
0.06
0.06
3
0.18
0.02
2
0.04
0.06
2
0.12
0.10
3
0.30
Threats
1. New regulatory complaints (new phone # portability).
2. Rising costs of healthcare.
3. Global unrest- economic monetary and financial.
4. Consumer privacy rights being attacked.
5. Weak Consumer spending.
6. Decreasing demand for traditional voice lines and fixed lines.
7. Increasing overlap of telecommunication territories.
8. Increasing competition for providers of web search directories.
9. Increasing providers of wireless services.
10. Brand recognition.
TOTALS
Weight Rating Weighted Score
0.10
3
0.30
0.07
2
0.14
0.12
3
0.36
0.02
4
0.08
0.10
2
0.20
0.05
3
0.15
0.06
3
0.18
0.02
2
0.04
0.06
4
0.24
0.10
4
0.40
1.00
2.79
1.
2.
3.
4.
5.
Competitive Profile Matrix
Competitive Profile Matrix (CPM)
Nextel
Critical Success Factors
Alltel
SBC
Weight Rating Score Rating Score Rating Score
Market Share
Price
Financial Position
Consumer Loyalty
Brand Awareness
0.10
0.25
0.20
0.30
0.15
Totals
1.00
4
3
4
3
4
0.40
0.75
0.80
0.90
0.60
2.75
2
4
3
3
3
0.20
1.00
0.60
0.90
0.45
3.15
3
2
4
3
3
0.30
0.50
0.80
0.90
0.45
2.95
Internal Audit
Strengths
1.
2.
3.
4.
5.
6.
36 percent sales growth over 5 years compaired to 12 percent for the industry.
ROA, ROI and ROE are all twice as attractive as the industry year-end 2003.
Sports marketing contracts.
Good brand awarness.
Known for product innovation like their coast to coast walkie talkie.
Net income increased over 12 percent in 2003.
Weaknesses
1.
2.
3.
Stock's beta is over 2, which is twice as volitle as the S&P 500.
Historically have returned negative net income.
Only major supplier is Motorola.
IFE Matrix
Internal Factor Evaluation Matrix (IFE)
1.
2.
3.
4.
5.
6.
Strengths
Weight Rating Weighted Score
36 percent sales growth over 5 years compaired to 12 percent for the
0.15
4
0.60
industry.
ROA, ROI and ROE are all twice as attractive as the industry year-end
0.15
4
0.60
2003.
Sports marketing contracts.
0.05
3
0.15
Good brand awarness.
0.10
4
0.40
Known for product innovation like their coast to coast walkie talkie.
0.10
4
0.40
Net income increased over 12 percent in 2003.
0.15
4
0.60
Weaknesses
1. Stock's beta is over 2, which is twice as volitle as the S&P 500.
2. Historically have returned negative net income.
3. Only major supplier is Motorola.
TOTALS
Weight Rating Weighted Score
0.05
1
0.05
0.10
2
0.20
0.15
1
0.15
1.00
3.15
Key Ratios
Growth Rates
Nextel
Industry
Sector
S&P 500
Sales (MRQ)
vs. Qtr 1yr ago
28.96
2.36
14.39
13.40
Sales (TTM) vs.
TTM 1yr ago
24.07
3.55
15.92
11.90
Sales- 5yr
growth rate
36.36
12.49
17.25
9.30
EPS (MRQ) vs.
Qtr 1yr ago
-59.68
-17.21
15.43
28.69
EPS (TTM) vs.
TTM 1yr ago
-9.51
-4.84
16.37
21.92
NM
-1.81
15.23
12.15
-4.35
-2.37
2.61
4.06
EPS- 5yr
growth rate
Capital
spending- 5yr
growth rate
Nextel
Industry
Sector
S&P 500
18.27
27.90
28.90
24.01
P/E 5 yr high
N/A
36.84
48.47
45.41
P/E 5 yr low
N/A
10.16
16.09
16.26
Beta
2.14
1.28
.96
1.00
Price to sales
(TTM)
2.47
1.93
2.80
3.33
Price to Book
(MRQ)
4.63
2.59
3.89
4.29
Price to tangible
book (MRQ)
N/A
4.36
6.60
7.56
Price to cash flow
(TTM)
8.43
6.92
17.03
17.32
Price to free cash
flow (TTM)
21.18
16.18
33.11
28.97
% Owned
institutions
76.07
38.23
50.48
64.19
Valuation Ratios
P/E Ratio (TTM)
Dividends
Nextel
Industry
Sector
S&P 500
Dividend Yield
N/A
4.20
2.14
2.04
Dividend yield 5yr
Average
0.00
2.34
1.43
1.48
Dividend 5yr
Growth rate
NM
-0.87
-0.89
6.48
Pay out ratio
(TTM)
0.00
33.73
15.54
26.78
Quick ratio (MRQ)
1.15
1.01
0.93
1.26
Current ratio
(MRQ)
1.31
1.22
1.47
1.76
LT Debt to equity
(MRQ)
1.64
0.84
0.74
0.68
Total debt to
equity (MRQ)
1.72
0.95
0.82
0.85
Interest coverage
(TTM)
2.70
3.18
7.84
11.86
Financial
Strengths
Profitability Ratios
%
Nextel
Industry
Sector
S&P 500
Gross Margin
(TTM)
70.88
60.97
42.84
47.32
Gross Margin-% Yr
Average
65.00
54.17
42.06
47.01
EBITD Margin
(TTM)
36.70
31.75
22.32
20.79
EBTID 5 Yr
Average
22.30
30.70
21.97
20.82
Operating Margin
(TTM)
21.04
12.99
12.90
20.33
Operating Margin5Yr Average
1.24
13.72
11.21
18.35
Pre-tax Margin
(TTM)
15.25
10.68
10.37
17.27
Pre-tax Margin 5yr
Average
-9.88
10.57
11.77
17.54
Net Profit Margin
(TTM)
14.21
7.03
7.54
13.12
Net Profit Margin 5
Yr Average
-10.37
5.18
7.62
11.59
Effective tax Rate
(TTM)
6.85
29.08
32.18
31.31
Effective Tax Rate
5Yr Average
14.43
35.99
36.04
34.20
Management
Effectiveness %
Nextel
Industry
Sector
S&P 500
Return on assets
(TTM)
7.24
3.21
5.91
6.40
Return on assets
5yr Average
-2.10
2.87
5.49
6.79
ROI (TTM)
8.44
3.84
7.98
9.97
ROI 5Yr Avg
-2.46
3.70
7.59
10.93
ROE (TTM)
36.82
13.28
13.51
18.71
ROE 5Yr Avg
-4.79
9.79
13.18
19.22
Revenue/Employee
(TTM)
636,471
405,314
479,338
622,866
NI/Employee (TTM)
90,412
102,467
90,606
81,707
9.45
7.39
17.23
9.76
14.39
21.63
17.53
10.46
0.51
0.47
1.17
0.29
Efficiency
Receivable
Turnover (TTM)
Inventory Turnover
(TTM)
Asset Turnover
(TTM)
1.
2.
3.
4.
5.
6.
1.
Opportuni ti es - O
141 million possible investors in
Europe, UK, and Germany.
1.
2.
Low P/E ratio which should attract
value investors.
2.
3.
Sports marketing can be luring for
younger customers.
3.
4.
Growing Hispanic population in the US.
5.
Increased desire for wirelsss service.
1.
2.
3.
4.
5.
6.
Threats - T
New regulatory complaints (new phone 1.
# portability).
Rising costs of healthcare.
Global unrest- economic monetary and
financial.
Consumer privacy rights being attacked.
Weak Consumer spending.
Decreasing demand for traditional
voice lines and fixed lines.
7. Increasing overlap of
telecommunication territories.
8. Increasing competition for providers of
web search directories.
9. Increasing providers of wireless
services.
10. Brand recognition.
Strengths - S
36 percent sales growth over 5 years
1.
compaired to 12 percent for the
industry.
ROA, ROI and ROE are all twice as
2.
attractive as the industry year-end
2003.
Sports marketing contracts.
3.
Good brand awarness.
Known for product innovation like their
coast to coast walkie talkie.
Net income increased over 12 percent
in 2003.
Weaknesses - W
Stock's beta is over 2, which is twice as
volitle as the S&P 500.
SO Strategi es
Expand wireless services into Europe,
UK and/or Germany (S1, S4, O1, O5)
1.
WO - Strategi es
Purchase international wireless
providers such as MMO2 (W3, O5)
1.
WT - Strategi es
Layoff part of the workforce to reduce
overhead costs. (W2, T3, T5)
Historically have returned negative net
income.
Only major supplier is Motorola.
Form new contracts with professional
athelties to market products (S1, S2,
S3, O3).
Acquire small domestic wireless
providers such as Powertel or Aerial
(S1, O5)
ST Strategi es
Expand to overseas markets to hedge
the falling price of the dollar (S1, O5)
Space Matrix
Y axis: Financial Strength
Environmental Stability
X axis: Industry Strength
Competitive Advantage
+3.2
-2
-2
+4
+1 worst to +6 best Y axis: 1.2
-1 best to -6 worst X axis: 2
+1 worst to +6 best
-1 best to -6 worst
FS
Conservative
Aggressive
6
5
4
3
2
1
CA
-6
-5
-4
-3
-2
-1
1
2
3
4
-1
-2
-3
-4
-5
-6
Defensive
ES
Competitive
5
6
IS
BCG
High
1.0
High
+20
Stars
Medium
Low
0.5
0.0
Question Marks
18% New Subscribers
10% Wireless
Medium
0
Cash Cows
Low
-20
Dogs
IE Matrix
The Total IFE Weighted Scores
Strong
4.0 to 3.0
4.0
I
Average
2.99 to 2.0
II
Weak
1.99 to 1.0
3.0
IV
V
VI
VIII
IX
III
High
The
EFE
Total
Medium
Weighted
Scores
2.0
Low
1.0
Nextel
VII
Grand Strategy Matrix
1. Market
Development
Rapid Market Growth
2. Market
Penetration
Quadrant II
Quadrant I
3. Product
Development
4. Forward
Integration
Weak
Competitive
Position
Strong
Competitive
Position
5. Backward
Integration
6. Horizontal
Integration
7. Concentric
Diversification
Quadrant III
Quadrant IV
Slow Market Growth
QSPM
Expand into
International
Markets
Increase
Domestic
Prescence
1.
2.
3.
4.
5.
Opportunities
141 million possible investors in Europe, UK, and Germany.
Low P/E ratio which should attract value investors.
Increased desire for wirelsss service.
Growing Hispanic population in the US.
Sports marketing can be luring for younger customers.
Weight
0.06
0.06
0.02
0.06
0.10
AS
4
0
4
1
3
TAS
0.24
0.00
0.08
0.06
0.30
AS
1
0
2
4
4
TAS
0.06
0.00
0.04
0.24
0.40
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Threats
New regulatory complaints (new phone # portability).
Rising costs of healthcare.
Global unrest- economic monetary and financial.
Consumer privacy rights being attacked.
Weak Consumer spending.
Decreasing demand for traditional voice lines and fixed lines.
Increasing overlap of telecommunication territories.
Increasing competition for providers of web search directories.
Increasing providers of wireless services.
Brand recognition.
Weight
0.10
0.07
0.12
0.02
0.10
0.05
0.06
0.02
0.06
0.10
AS
2
0
1
3
2
3
4
3
3
3
TAS
0.20
0.00
0.12
0.06
0.20
0.15
0.24
0.06
0.18
0.30
AS
1
0
3
2
1
1
2
2
1
4
TAS
0.10
0.00
0.36
0.04
0.10
0.05
0.12
0.04
0.06
0.40
QSPM
Expand into
International
Markets
1.
2.
3.
4.
5.
6.
Strengths
Weight
36 percent sales growth over 5 years compaired to 12 percent for the
0.15
industry.
ROA, ROI and ROE are all twice as attractive as the industry year-end
0.15
2003.
Sports marketing contracts.
0.05
Good brand awarness.
0.10
Known for product innovation like their coast to coast walkie talkie.
0.10
Net income increased over 12 percent in 2003.
0.15
Weaknesses
1. Stock's beta is over 2, which is twice as volitle as the S&P 500.
2. Historically have returned negative net income.
3. Only major supplier is Motorola.
TOTALS
Weight
0.05
0.10
0.15
Increase
Domestic
Prescence
AS
TAS
AS
TAS
3
0.45
4
0.60
3
0.45
4
0.60
3
3
4
2
0.15
0.30
0.40
0.30
4
4
2
3
0.20
0.40
0.20
0.45
AS
0
1
0
TAS
0.00
0.10
0.00
AS
0
2
0
TAS
0.00
0.20
0.00
4.34
4.66
Possible Strategies
• Expand coverage in underdeveloped rural
areas
• Expand and strengthen international
markets i.e. Latin America
• Penetrate the foreign market
• Use advertising leverage with NASCAR to
diversify markets
• Focus on retaining current customers
while attracting new customers
Decisions
• Primary
– Concentrate on gaining more market share in
the U.S. by achieving a merger with another
wireless provider such as Sprint.
• Possibilities
– Progress into Foreign Market
– Expand Target Market
Implementation
• Aims
– Increase income by 55% within the next 3
years
• Increase revenue by 25% within the next 3 years
– Decrease long-term debt by 30% within the
next 3 years
• Match industry averages within the next 3 years
– Increase research and development in order
to maintain competitive advantage
2004 Financial Statistics
•
•
•
•
•
•
Operating Revenues
$3,000.0 million
Net Income
$3,000.0 million
EPS
$2.62
Capital Expenditures
$(2513.0) million
Total Debt
$13,336.0 million
Cash Flow from Operating Activities
$4,288.0 million
• Weighted Average Shares Outstanding
$1,124.0 million
Press Releases
• November 12, 2004
– Nextel Gets Perfect Score
• November 29, 2004
– Nextel Awarded With The Best Sports Business
Integration
• December 7, 2004
– Boost Mobile Passes One Million Customer Mark
• December 15, 2004
– Sprint and Nextel to Combine in Merger of Equals