Another Bad Week for WiMax, and Clearwire

Lots of WiMax news today:

• The only national WiMax carrier, Clearwire (CLWR), has doubled its national footprint, going from one city (Baltimore) to two (add Portland). Clearwire has ambitious (I’d say unrealistic) goals to win 425,000 subscribers, more than half of about 750,000 households in the Portland metropolitan area.
• Intel (INTC) wrote off $950 million of its $1.6 billion investment in ClearWire. CLWR shares dropped 74% during calendar year 2008. This also suggests that Intel’s $300 million in WiMax advertising is probably worthless, too.
• Nokia (NOK) dropped its only WiMax device, a WiMax version of its N810 tablet, to shift all of its 4G focus to LTE.

When ClearWire was preparing its IPO near two years ago I concluded:

As with other such businesses, I can see three outcomes:

1. Clearwire gets enough money from the IPO to grow big;
2. Clearwire does well enough to get gobbled up by one of the big boys (a successful strategy recommended by my old mentor Charlie Jackson); or
3. Clearwire runs out of money and dies.

I think we can rule out option #2 — Sprint (S) got out of the WiMax business by handing it to Clearwire, and it’s got big enough problems of its own that it can’t bail anyone else out. The other US carriers aren’t interested in WiMax because they’re all going with LTE. Foreign carriers are even less interested in WiMax.

With two of its key strategic investors pulling back, a few analysts speculate that Google (GOOG) will add to its existing $500 million investment in Clearwire (but no one is predicting a complete bailout). I can’t see why Google would want to do this.

The chances of #1 happening don’t look very good either. ClearWire has less than $400m in liquid assets on its books. Verizon Wireless (VZ) is on track for capital spending of about $10 billion just in 2008— and (for those of you who don’t watch American TV) it already has a large nationwide network.

So absent a tremendous positive cashflow from its existing (or near-term) markets — or a new round of debt or equity — I don’t see how ClearWire is going to build a nationwide footprint. And if there are doubts about the prospects of a nationwide network, business travelers aren’t going to sign up for the existing and forthcoming cities.

Eight months ago, I said: “WiMax as technology is done, finish, finito — stick a fork in it.” After this week, it seems as though Nokia and maybe even Intel agree.

In those eight months, the availability of capital and the willingness of consumers and businesses to spend money on technology has dropped dramatically. So I’m even more pessimistic about WiMax than I was before.

Addendum: In response to my posting yesterday, the Clearwire PR agency contacted me to point out a material omission: the $3.2 billion investment that Clearwire announced on Dec. 1 from Intel, Google and some cable companies. This did not show up in the most recent (Sept. 30) balance sheet reported by CLWR, and I did not see the announcement when it was made. Thus, compared to my conclusions yesterday, Clearwire has the cash to do a lot more deployments before it runs out of money.

Comments

[mikaelnunez:]

Babe,you wrote such a dump article:

1) Do a one-year chart of Clearwire stock vs. ALU or NT and tell yourself how they all do

2) How many people you know who carry a NOK tablet?

3) Sprint did not drop WiMAX. It owns 51% of Clearwire; spinning off its WiMAX business was the key reason for Google, Intel to invest in its WiMAX business.

Jan 08 02:14 PM

[djakel:]

Correction: The write down is required by an accounting rule, not because Intel believes its investment is "worthless" as you so carelessly state. Also, Clearwire just received $3.2 billion in cash from its investors, so they have much more than the $400 million you state.

You are entitled to your opinion, which everyone now knows is "worthless".

Jan 08 04:05 PM

[Geddy:]

But it will take MUCH more than that to build out a national network...I believe that's what he's trying to say.


On Jan 08 04:05 PM djakel wrote:

> Correction: The write down is required by an accounting rule, not
> because Intel believes its investment is "worthless" as you so carelessly
> state. Also, Clearwire just received $3.2 billion in cash from its
> investors, so they have much more than the $400 million you state.
>
>
> You are entitled to your opinion, which everyone now knows is "worthless".

Jan 08 09:06 PM

[Geddy:]

Sprint did "drop" WiMax by dumping their operation off. Yes, they own it partially...but don't run it. They have MANY problems of their own to deal with (like stopping the millions of customers leaving each quarter).

Also, comparing CLWR to a vendor stock is not even close to being comparable. Try comparing CLWR vs. T or VZ...you'll see the BIG difference.

Sorry folks, Clearwire is horrible!


On Jan 08 02:14 PM mikaelnunez wrote:

> Babe,you wrote such a dump article:
>
> 1) Do a one-year chart of Clearwire stock vs. ALU or NT and tell
> yourself how they all do
>
> 2) How many people you know who carry a NOK tablet?
>
> 3) Sprint did not drop WiMAX. It owns 51% of Clearwire; spinning
> off its WiMAX business was the key reason for Google, Intel to invest
> in its WiMAX business.

Jan 08 09:09 PM

[EdgarC:]

Considering that had you followed the press conference from this week with Clear, the city of Portland announced through its mayor at the press conference that the city will be converting all the citywide parking meters, security at Max transit stations, and police cars over to the Clear WiMax product which will give the company a major cash infusion.

Jan 09 08:12 PM

[Geddy:]

Sorry Portland...but good for the criminals when that Clearwire junk fails!


On Jan 09 08:12 PM User 334559 wrote:

> Considering that had you followed the press conference from this
> week with Clear, the city of Portland announced through its mayor
> at the press conference that the city will be converting all the
> citywide parking meters, security at Max transit stations, and police
> cars over to the Clear WiMax product which will give the company
> a major cash infusion.

Jan 09 11:11 PM

[xander:]

I use the wimax system in the baltimore area to get internet over the air; it works very well and it costs me only 25 dollars a month , later to go to 35 after 6 months. They have a 50 dollar plan that lets one have the service on both a desktop unit and a service on a laptop not tied to home usage. the 50 dollar plan is fixed at 50 dollars for as long as one wants it.

Jan 11 02:23 AM