Sprint Nextel (S) recently updated its executive bonus plan metrics to reflect what is likely a new corporate strategy: Focusing on growth at the expense of profitability.
The company’s new short-term incentive plan — disclosed in a SEC filing today — weighs post-paid net subscriber additions at 40%, up from 20%; and now weighs adjusted income at 30%, down from 50%.
As a result, Goldman Sachs analyst Jason Armstrong reduced his EBITDA forecasts by 2-3% over the next few years; lowered his Sprint price target to $4 from $4.50; and improved his forecast for Sprint’s 2009 post-paid net subscriber losses by about 200,000.
This strategy makes sense, assuming Sprint can execute. The carrier can’t afford to keep losing subs to AT&T and Verizon. It may require some more aggressive handset subsidy, rate cuts, or advertising, but there’s no time to wait.
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