Updated from 7:31 a.m.

Nextel ( NXTL) continues to hit on all cylinders.

The cell-phone service provider doubled second-quarter operating profits Wednesday, while posting stronger-than-expected subscriber growth and reduced customer defections. But the company's shares slipped 2% as investors continue to weigh the pros and cons of the fast-growing, debt-heavy carrier.

For its second quarter ended June 30, the Reston, Va., company posted earnings of $1.3 billion, or $1.17 a share, after a tax-valuation gain. That's up from the year-ago $281 million, or 27 cents a share. Revenue surged 29% from a year earlier to $3.3 billion.

Excluding charges and gains in both periods, latest-quarter earnings jumped to $608 million, or 55 cents a share, from the year-ago $288 million, or 28 cents a share. Wall Street analysts had expected Nextel to post earnings of 50 cents per share on $3.2 billion in sales.

"Our second-quarter results reflect continued progress on multiple fronts and we are on track to meet or exceed our 2004 guidance," said CEO Tim Donahue. "Subscriber quality improved during the second quarter as reflected by an increase in average monthly revenue per subscriber (ARPU) and a reduction in customer churn.

For the year ending in December, analysts surveyed by Thomson First Call expect the company to earn $2.09 a share on revenue of $13 billion.

On Wednesday, Nextel said it added 546,000 subscribers and posted a monthly churn rate of 1.6%. The company said average revenue per user rose to $70 from $69.

Some industry observers had expected Nextel to post a monthly customer defection, or churn, rate of 1.4% for the quarter ended in June. That would be one of the company's lowest rates ever and a far cry from the 3.7% rate of departures at troubled AT&T Wireless ( AWE) last quarter. Nextel was also expected to add about 500,000 new subscribers last quarter.

The company said it ended the second quarter with $2.1 billion in cash and $9.6 billion in debt.

Nextel has made plenty of believers with its performance over the last two years. And this year the news has only gotten better, with strong financial progress buttressed in recent months by a new credit line and a favorable spectrum swap decision. But as is the case throughout tech, the walkie-talkie seller finds itself facing rising expectations this summer -- a situation that Wall Street knows can be fraught with peril.

Concerns about the company's debt load and rising competition have weighed on the stock this year. Unlike last year, when its shares doubled, Nextel has spent 2004 sputtering. It fell 53 cents Wednesday to $25.47, putting it down 7% for the year.

Like the suddenly struggling Net sector, the wireless sector leaders have come under pressure recently. Another earnings disappointment last week from handset king Nokia ( NOK) certainly didn't help matters, though Tuesday's more measured report from Motorola ( MOT) was reassuring.

Last week, the company refinanced by replacing a secured loan and credit line worth $2.6 billion with a new $4 billion credit line. Earlier this month, the Federal Communications Commission approved of a radio frequency swap that gives Nextel a swath of 1.9 megahertz spectrum in exchange for $4.3 billion worth of 800 MHz licenses.

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