3. We 'Half' Ways of Making You TalkWhat's the true value of a merger of Sprint (FON) and Nextel (NXTL)? We have no clue. And we believe that Sprint and Nextel don't have too good an idea, either. Let us explain: Back when we first got into the financial reporting racket, a kindly man once sat us down to tell us a little secret. The secret, he said, would come in handy anytime we learned that two companies had embarked on a venture in which they said they were splitting the proceeds on a 50/50 basis. What's wrong with going in on something 50/50, we asked? Nothing, really, he said. But when partners end up with a 50/50 split, he said, it's probably because they have no clear idea as to what the relative value of their contributions are to the joint venture. So they just split the take down the middle. As a counter-example, he offered the situation of an actor and his agent. When an actor gets paid, his agent gets 10% of the money -- a reflection of the educated guess that when the agent negotiates a job and the actor takes it, the actor himself is contributing 90% of the value to the actor/agent partnership. But 50/50? That means that neither party really knows what's worth what. Which brings us back to Sprint Nextel. In announcing their "surprise" merger Wednesday, the parties were scrupulously even-handed in their description and execution of the deal.
|Right Down the Middle
Sprint and Nextel go halfsies