Nextel Optimistic Despite Declining ProfitsNextel Optimistic Despite Declining Profits

Nextel Communications Inc. posted earnings Thursday that were down 9% from last year. But the wireless communications provider says its finances are healthier than ever, and will continue to improve.

For the quarter ended Sept. 30, Nextel posted a profit of $348 million, or 32 cents per share, down 9.1% from earnings of $383 million, or 55 cents per share, in the same quarter a year ago. Revenue was up 27%, reaching $2.89 billion from $2.28 billion a year ago.

Nextel says the reduced net income was due to higher expenses and debt retirement charges, and expects improvement in future quarters. The company released revised estimates for the rest of the fiscal year, saying that it expects 2003 earnings of at least $1.15 a share, up from its previous target of $1.

Nextel says it added approximately 646,000 subscribers during the third quarter, bringing total subscribers to 12.3 million. That number doesn't include 245,000 subscribers of Nextel's Boost Mobile subsidiary, which added 102,000 new customers during the quarter.

The results are "unquestionably solid," says Technology Business Research analyst Christopher Foster, and the company's growth and profitability are among the industry's best. Nonetheless, Foster says Nextel may falling behind its competitors in the enterprise market, expected to be an extremely profitable growth area for the next three years. Says Foster, "Nextel's Achilles' heel remains its lack of a strategy for high-speed data for the enterprise and its reliance on Motorola handsets."