March 20, 2008
Sir Richard’s bad call on mobile phones
You win some and you lose some has always seemed to be Virgin’s business model. In the case of Virgin Mobile USA, the pre-paid phones venture of Sir Richard Branson’s Virgin Group, it has been mostly the latter.
Virgin Mobile USA has put in a spectacularly bad performance since its US initial public offering in October. It floated at $15 a share and closed yesterday at just over $2 a share. It has dropped steadily since the IPO and last week lurched downwards on a gloomy earnings forecast.
The business is a joint venture with Sprint Nextel which sells pre-paid phones aimed at young people. It has been doing badly in a soggy market: there is increasing competition among operators and the US shows signs of being near capacity for mobile phone penetration.
Things are not particularly great for mobile operators and manufacturers in general at the moment. Sony Ericcson issued an earnings warning yesterday and its shares - and those of Nokia - both fell sharply.
Sir Richard can take comfort that Virgin Group offloaded about 11 per cent of its original 47 per cent stake in Virgin Mobile USA in the IPO. On the other hand, it still holds about one third of the company.
Nor does it help his sometimes strained relations with stock market investors. Some of his misadventures were detailed in this FT article.
