Not all mergers improve revenue in the short term as is evident in recent earnings announcements by two acquisitive companies: Sprint Nextel Corp. and TD Banknorth Inc.
Sprint Nextel announced Wednesday that net income fell 11% to $417 million, or 14 cents a share, from $470 million or 31 cents a share in the year ago period. Sprint said earnings fell by 21 cents on expenses, including 19 cents per share because of merger-related charges. Excluding these expenses, Sprint said it would have earned 35 cents a share. Sprint Nextel was formed when Sprint acquired rival wireless provider Nextel Communications in August 2005 for $35 billion. Despite the negative impact of mergers, last week Sprint agreed to acquire affiliate UbiQuietel Inc.
Meanwhile banking company TD Banknorth announced first-quarter earnings that at first aren't so bad, but could have been better had it not engaged in its latest merger. The bank increased net income to $76.2 million, or 36 cents per share, a jump from $34.1 million, or 18 cents per share from the year ago period. TD said the addition of TDWaterhouse helped revenue from commissions and clearing fees rise 74% to $221 million, while net interest revenue doubled to $173.4 million. However, the banking conglomerate said it would have earned 55 cents per share but was weighed down partially by merger and structuring charges related to the 2005 union of its TD Waterhouse USA brokerage unit with rival Ameritrade Holding Group. —Gerald Magpily
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