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Shawn Lee
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Shawn currently works for a long - short equity hedge fund located in Manhattan as an equity research analyst concentrating on tech stocks.
  • Three Positive Catalysts for CLWR  0 comments
    Jul 30, 2010 2:36 PM | about stocks: CLWR, S

     

    Despite CLWR's lack of stock price action and years of capital spending to build infrastructure without much gain in earnings, there are three positive catalysts imminent in favor of CLWR.


    1) More 4g Smartphones

    Only a few weeks after the successful launch of EVO, Sprint announced its future launch of Samsung Epic, another 4g capable smartphone. People might have different views on how successful EVO was, in comparison to Palm Pre or other Sprint smartphones, EVO was the most successful one. Although the success of EVO is not solely due to it’s 4G capability, S, having already invested billions of dollars in CLWR, would want to utilize 4G as much as possible. From here on, there is no reason why Sprint should launch a single smartphone without 4g capability.  It is not too farfetched to imagine that by this time next year there could be close to ten 4g smartphones. With more widespread of 4G capable smart phones, the more revenue 
    CLWR will generate.

    2) Consumer's Growing Appetite for Large Data on Smartphones

    About two months ago, T announced its new data plan, which basically caps the data usage for the customers, and the customers will need to pay a penalty if they use more data. What T is neglecting is the fact that there is a strong growth in appetite for data. T says that the majority of their data plan customers won't be affect by the new data plan. T is right, FOR NOW. The demand for large amount of data is increasing noticeably. The average quality of videos on YouTube is turning richer, people are uploading higher quality pictures on facebook, and more people are subscribing to Netflix and watching streaming HD videos. People are getting used to faster internet such as VZ's FIOS and Time Warner's Wideband. The current 3G networks won't be able to satisfy the growing demand. The only better and immediate alternative to 3G is CLWR's Wimax.

    3) Wimax's Advantage over LTE
    A lurking risk for 
    CLWR is the international adoption of LTE standard. LTE has been announced to be the global 4g network standard by many of the big telecom corporations. However, one thing to note is the fact that only two cities, Oslo and Stockholm, officially launched a "working" LTE network. An official launch of LTE in US has been postponed a few times and yet no official launch has happened. VZ launched an LTE trial at a cafe in Boston to show the YouTube community that LTE is on the way and how great it is. It's already July of this year and within US, LTE's coverage is one Boston cafe vs. 67 markets CLWR, estimating to reach coverage of 120 million people by end of this year. CLWR started launching its 4g service around 4 years ago. It's taken CLWR 4 yrs and billions of dollars to come up with a working and widespread network. LTE seems like it's just starting to jump in the 4G game. 

     In order for LTE to be competitive it will need to build out infrastructures to places where Wimax has not come in yet. Wimax has already eaten up many locations where 4G network seems most lucrative. The slower LTE starts building out infrastructure, the more Wimax will cover those lucrative locations. LTE will have to choose to enter into a less lucrative market or fight with CLWR on CLWR's turf. Whatever their choice is, LTE is exposed to the 2nd player disadvantage. 

    I am fully aware of CLWR's atrocious balance sheet and its probable need of capital infusion to stay afloat. The best case scenario, the catalysts play out and CLWR starts to generate earnings. The worst scenario, CLWR gets acquired by one of the telecom giants other than Sprint. Either way, CLWR's Wimax is here to stay.



    Disclosure: Long CLWR
    Stocks: CLWR, S
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