On March 12, iSuppli released their forecast for Mobile Internet Devices, or MIDs, which are defined as any portable wireless internet connected device with a screen of at least 8 inches in diameter, and instant-or-always on functionality. There were around 54 million of these devices in 2007, largely smart phones.
New devices such as netbooks, ebook readers and handheld gaming devices are adding to the growth of this category. MIDs are projected to grow to 416 million units in 2012, a compounded annual growth rate of over 50%. MIDs are the cars that will drive on a broadband wireless internet highway, and there will be a monthly toll for gaining access to that highway.
Clearwire’s (CLWR) newly launched CLEAR broadband internet service varies in price depending on speed, but it’s probably reasonable to assume that average pricing will be around $40 per month and possibly more (current ARPU for pre-WiMax at Clearwire is $39). But let’s be conservative and cut the service fee in half to $20 a month. It’s probably too aggressive to assume that all 416 million of these new devices will require a separate subscription, so let’s say half of them share a subscription via a home WiFi portal or something similar. Even with all those haircuts, that’s still a global total available market (TAM) for wireless broadband services on the order of $50 billion per year by 2012. (And by the way, this TAM is based only on the devices that ship in 2012, and doesn’t even include all the MIDs that shipped in prior years.)
Sure, Clearwire’s WiMax will have competition, and the LTE (3GPP release 8) is bound to capture a good chunk of the emerging broadband wireless market. But the wireless market has always been shared by multiple players and multiple technologies. That’s why virtually all phones can roam onto competitors’ networks.
If nothing else, the market size shows that Clearwire doesn’t need to dominate the broadband wireless market to become a runaway success story. Clearwire’s stock closed Friday at $3.59 a share. The company hasn’t yet filed its 10-K, so the public databases still don’t reflect the company’s merger with Sprint’s (NYSE:S) WiMax operations or the $3.2 billion strategic investment from Google (NASDAQ:GOOG), Intel (NASDAQ:INTC), and several cable TV operators. With around 694 million shares outstanding, the market cap is around $2.5 billion. Plus, the company has $3.1 billion in cash (including equivalents and short term investments) which is earmarked for network expansion as they target broadband wireless coverage of up to 120 million people by the end of 2010.
The stock has been rising steadily over the past week and is up 35% from recent lows. But it’s not too late: with the market cap of the company at less than 5% of the global 2012 TAM, and $3.1 billion in cash in the bank, this stock has plenty of upside.
Disclosure: long CLWR