Shares of Sprint stock fell 4.5% Monday morning after an analyst said there is an increasing risk that the nation’s third largest wireless carrier could file for bankruptcy. The company is facing increased competition, growing debt and steep costs, with flops in Clearwire’s WiMAX technology, a failed LightSquared partnership and a risky $15.5 billion gamble on Apple’s iPhone further complicating its position. Read on for more. More →
LightSquared announced on Tuesday that the company plans to cut its workforce by 45% in an effort to cut costs. “This and other cost savings measures will allow LightSquared to continue to navigate the regulatory process as it works with the appropriate government agencies to find solutions to the GPS interference issue and bring its $14 billion privately funded wireless broadband network to more than 260 million Americans,” the company said in a statement to Reuters. Last week, the FCC announced that it would block the company’s planned 4G LTE network due to issues concerning GPS interference. LightSquared currently employs 330 people and according to Reuters, the company is not currently considering bankruptcy. More →
Nokia’s local assets were seized by Romanian tax authorities on Friday after it was revealed the company’s Romania-based subsidiary owes the government $10 million, Bloomberg said Friday. “We decided to seize the assets as a precautionary measure to prevent Nokia from selling them before they pay their debt to the state,” head of Romania’s tax authority Sorin Blejnar said. “This won’t affect the activity of the factory.” Nokia announced in September that it would close its operations in the country, although the origin of the vendor’s $10 million in debt is unclear. According to Convert News, the debt may be related to bills that Nokia owes for transporting its materials in the country. Nokia has not yet commented publicly on the situation. More →
Following a rating review initiated on January 28th, Moody’s on Thursday lowered Nokia’s senior debt rating from A2 to A3 and cut its short-term debt ratings from Prime-1 to Prime-2 with a negative outlook. Moody’s cites Nokia’s weakened position in the cell phone market and uncertainty surrounding the company’s upcoming transition to Microsoft’s Windows Phone platform as the reasoning behind the downgrades. “The rating downgrade primarily reflects Nokia’s weakened market position in its core business, mobile devices, which has reduced the company’s margins and funds from operations,” said Moody’s SVP and lead Nokia analyst Wolfgang Draack in a note. “In Moody’s view, the main reasons for this trend are: (i) an inflexible smartphone operating system; (ii) slow time-to-market for new models; (iii) more attractive innovation by smartphone competitors; and (iv) accelerating price competition for low-end phones.” The move follows Standard & Poor’s decision to downgrade Nokia’s credit rating last month, when it said it expects Nokia’s market share to continue to slide through this year and in 2012.
Modu Ltd., maker of some of the smallest cell phones in the world, will soon be forced to shut its doors according to a pair of reports from Israeli news site Ynet. The news follows reports from November of last year stating that the Israel-based company was forced to cancel a planned IPO and instead begin laying off most of its staff. It now appears as though modu will be forced to close in early February and until then, only a small sales team will remain in place to sell off remaining inventory. According to the report, modu currently owes $123 million to investors and another $21 million to the Israel Discount Bank. Modu may also owe a substantial sum to former employees, who today filed a liquidation request with Israeli courts in an effort to recoup salaries they are allegedly owed. Modu made a name for itself in 2008 when it announced a tiny modular cell phone that could take on new shapes and functions by sliding into various accessories. It would later announce two new devices — the modu T phone, the lightest touchscreen phone in the world, and a Wi-Fi-only VoIP phone called the modu W — but neither phone would become widely available. More →
Last month, we reported on the short-term liquidity problems on the horizon for WiMAX network operator Clearwire, and today, the company has announced measures aimed at rectifying its current situation. Clearwire plans to raise over $1.1 billion through the sale of debt securities in “private placement transactions.” As the press release reads:
Clearwire Communications is offering $175.0 million first-priority senior secured notes due 2015, $500.0 million of second-priority secured notes due 2017 and $500.0 million of exchangeable notes due 2040 and will grant the initial purchasers of the exchangeable notes an option to purchase up to an additional $100.0 million of exchangeable notes.
The securities will be offered to “qualified institutional buyers” only and note-holders will be paid-out in either cash or stock once the paper hits maturity. Recently, the “4G” network operator cut close to 15% of its workforce in order to conserve cash.
U.S. wireless provider Sprint — whose WiMAX enabled devices run on Clearwire’s airwaves — owns 54% of the network operator. Sprint declined to comment on the planned sales. More →
Via a press release, Blockbuster has announced a “pre-arranged” bankruptcy in order to “recapitalize” and “substantially reduce its indebtedness.” The Chapter 11 filing will take the embattled company’s debt from roughly $1 billion down to $100 million; the filing is for the company’s U.S. branches only. “Blockbuster franchise locations in both the U.S. and abroad are independently owned, operated and funded, and are also continuing normal business operations,” explained the press release. Unfortunately, if you happen to hold some Blockbuster debt — and are not part of the company’s 11 “3/4 percent senior secured note holders” — you’re going to be out in the cold. “Under the proposed plan, there would be no recovery by the holders of the Company’s outstanding subordinated debt, preferred stock or common stock,” reads the filing. Hit the read link for the full release. More →
Blockbuster continues its downward spiral as it has been suspended from trading and forced to delist from the NYSE effective next Wednesday. Currently trading at $0.18 per share, Blockbuster failed to win majority stockholder approval last week for a reverse stock split that would have brought its stock above the $1 threshold and back in compliance with the NYSE. In a move that delays any immediate bankruptcy proceedings, Blockbuster was given a one-month reprieve on debt payments that the movie rental giant failed to pay on July 1st. The creditors, which hold nearly $440 million of Blockbuster’s whopping $920 million of debt, agreed to postpone any “remedies” until August 13th. In the upcoming weeks, Blockbuster is hoping to negotiate with partners to get a quick infusion of cash by possibly converting some bondholders to equity investors. This quick fix may be a little too little, a little too late and may only delay the inevitable bankruptcy as Blockbuster shows no signs of becoming profitable in the foreseeable future. More →