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Sprint-Clearwire WiMax Pact Falls Through; Clearwire Earnings Drop

Nov. 09, 2007 7:03 AM ETS

The Wall Street Journal reports that Sprint Nextel is calling off its agreement with Clearwire to build a national WiMax network that will reach 100 million Americans. WiMax is similar to WiFi in that it provides wireless internet connectivity to large physical spaces, but boasts the ability to do so at faster speeds. The companies had signed a 'letter of intent' in July with 60 days to cement a comprehensive agreement (full summary). But continuing financial troubles at Sprint caused CEO Gary Forsee to be shown the door in October, effectively unravelling what was shaping up to be a potentially complex revenue sharing agreement between the companies. In addition to raising questions about the future of Sprint's WiMax unit, the move will likely hurt outside investors in WiMax-related technology, most notably Intel and Motorola. Tech website Gizmodo.com says the cancellation, "is a bigger blow to Clearwire, the smaller of the two companies, which might need a cash injection from WiMax-backers like Intel to stay on track." Sprint had planned to spend $5 billion developing the joint network through 2010. Separately, Clearwire's Q3 earnings showed an increasingly cash-negative business. The company reported net income of -$328.6 million (-$2.01/share) versus -$118 million in the previous quarter and a loss of just $60 million a year ago. Revenue rose to $41.3 million from $26.9 million. Clearwire lost $0.95 per share on an adjusted basis, badly missing consensus analyst estimates for $0.78/share loss. Clearwire shares are down 26.8% YTD; Sprint's are down 12.4%.

This article was written by

Jonathan (Yoni) Liss has been with Seeking Alpha since 2006 in a variety of capacities. In his current incarnation, he serves as Senior Product Manager for the Seeking Alpha Marketplace as well as the host of the Let's Talk ETFs podcast. When not at the Alphaplex in Ra'anana, he resides in Jerusalem, Israel with his wife, 3 kids and zero pets.

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