Sprint Faces Management Muddle

After nearly a week of speculation, Sprint Corp. (NYSE: FON) acknowledged this past weekend that current CEO William T. Esrey may soon be leaving, and that Sprint's board has offered the CEO position to BellSouth Corp.'s (NYSE: BLS) vice chairman, Gary Forsee (see Sprint Considers Management Changes).

Meanwhile, BellSouth was granted a temporary restraining order late Friday to prevent Forsee from accepting Sprint’s offer. A court hearing on the matter is expected to take place within the next couple of days.

The court order is meant to “prevent Mr. Forsee from accepting any position with Sprint or any other competitor,” BellSouth spokesperson Jeff Battcher said last night.

Forsee, 52, who has been considered a likely successor to BellSouth’s current chairman and CEO, Duane Ackerman, has a non-compete clause in his contract that bars him from joining a competing service provider within 18 months of leaving BellSouth.

Forsee previously worked in Sprint’s long distance and wireless divisions between 1989 and 1999.

Sunday's announcement was Sprint’s first public comment on the management shake-up. But changes have been widely anticipated following an initial report last Wednesday in the Wall Street Journal, predicting that both Esrey and Sprint president and COO Ronald LeMay would soon leave the company, and that Forsee had been selected as the next CEO.

Esrey, 63, had been expected to relinquish his position at Sprint due to health concerns, following a diagnosis of cancer of the lymphatic system last November, but the rumored imminent departure of LeMay took the market by surprise.

Sprint saw its stock price drop nearly 9 percent, to $11.98 a share, following the report last Wednesday. On Friday, the company’s stock crept back up to $12.14 a share.

In yesterday’s announcement, Sprint stated that LeMay would remain in his current position. The company’s confirmation that it has offered the CEO job to Forsee, however, is a strong indication that LeMay, who had been widely expected to replace Esrey as head honcho at Sprint, is on his way out the door.

"I’m not surprised about Esrey, but I am surprised about LeMay," Guzman & Company analyst Patrick Comack said last week. "[He] was the heir apparent to Esrey.”

The full significance of Sprint's management changes remains to be seen. But tongues are wagging, particularly about LeMay. Industry observers speculate that Sprint’s board could have fallen out with him and Esrey over the future direction of the company. There’s also speculation that the board is disappointed with the numbers that Sprint will reveal in its fourth-quarter and full-year 2002 earnings report on Wednesday. Another rumor has it that a merger with one of the regional Bells, possibly with BellSouth or another RBOC, has been discussed.

“When a board tries to suggest a merger, management teams sometimes start looking for cover,” Bart Schachter of Blueprint Ventures said last week. “That could be what’s happening here.”

— Eugénie Larson, Reporter, Light Reading
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