Did Too Many Hang Up on Nextel?

By Gary Weiss

Nextel Communications (NXTL ) has generated excitement--of the wrong kind--for investors. On Sept. 19, the nation's fifth-largest cell-phone company announced that Chief Operating Officer James Mooney would be leaving at the end of the month. While officials scrambled to tell the media and Wall Street his departure was for personal--not business--reasons, the NASDAQ-traded stock dropped 16%, to 7, in just one day. Its Class A shares have since recovered slightly but remain in the doldrums.

Nextel's troubles, and the Street's swift reaction, spell opportunity to Clifford Henry, who runs Worthington Growth, a hedge fund in Stamford, Conn. Henry has been buying Nextel shares in the belief that the market overreacted and that Nextel will come out of the resignation controversy with its feathers unruffled. He notes that the company recently certified its financial statements with the Securities & Exchange Commission and that there do not appear to be any accounting issues. From a fundamentals standpoint, he says, the company is heading in the right direction.

Nextel's trail of quarterly losses has been turned around, with a profit of $387 million, or 37 cents a share, in the second quarter, vs. a loss of $369 million, or 56 cents, the year before. The subscriber count stood at 9.6 million in June, up from 8.3 million a year before. Henry believes the stock could trade in the $12-to-$15 range in a year.

Gene Marcial is on vacation.

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