Sprint Turns Profitable Amid Management ControversySprint Turns Profitable Amid Management Controversy

Sprint is starting the new year with a management controversy, but it weathered the storm in the telecom market last year with bright spots in both quarterly and year-end results.

The carrier on Wednesday posted $26.63 billion in revenue for 2002, up 4% from $25.52 billion in 2001. Operating income for the year was $630 million, or $1.18 per share, compared with a loss of $1.4 billion, or 33 cents a share, in 2001.

Fourth-quarter revenue was $6.53 billion, compared with $6.52 billion during last year's fourth quarter. Net income, including one-time charges, was $39 million, or 28 cents per share, compared with a fourth-quarter 2001 loss of $1.23 billion, or $1.06 a share.

"This year has been significant on three major fronts-improving our operating performance, vigilant cost containment, and a significantly improved balance sheet," chairman and CEO William Esrey said in a statement.

Esrey didn't address questions about his or president and chief operating officer Ronald LeMay's plans to leave Sprint. The company confirmed Wednesday that Esrey, who announced in November that he has lymphoma, will be stepping down, so his resignation wasn't as much of a surprise as that of LeMay, who many assumed would be Esrey's successor. "Management is focused on operation and running the company," he said. "If there's anything else to say, we'll say it at the appropriate time."

The Wall Street Journal, citing unnamed sources, reported Wednesday that Esrey and LeMay were being forced out as part of a boardroom dispute over their use of a tax shelter that's under scrutiny by the Internal Revenue Service. Esrey and LeMay reportedly used the shelter to defer tax payments when they exercised stock options in 1999 and 2000.

Sprint is engaged in a legal battle to get Gary Forsee, currently vice chairman of BellSouth Corp. and a former Sprint employee, to take the helm. His contract with BellSouth bars him from working for a competitor for 18 months after he leaves that company. A Georgia judge issued a temporary restraining order last weekend that prevents Forsee from replacing Esrey.

For his part, Esrey has done a good job of positioning the company for the next few years, analysts say. "Sprint is not in great financial shape, but Mr. Esrey has done a good job of getting Wall Street to buy into his plan," says David Rohde, a senior analyst at TechCaliber Consulting. "He has said he will find the profits to meet Sprint's very heavy debt commitments in the next two to 2-1/2 years. So far, where Sprint is finding extra profit is almost exclusively on the cost-cutting side."