WiMAX Operator, Clearwire Stock Falls on Weak Results, Forecast
Published on: 4th March 2008
WASHINGTON (Dow Jones) -- Shares of wireless-Internet provider Clearwire fell sharply Tuesday amid weak fourth-quarter results, but analysts say the future of the company rests primarily on a proposed venture with Sprint Nextel.
Clearwire, founded by billionaire and wireless-industry pioneer Craig McCaw, is seeking to build a nationwide network based on so-called WiMax technology. Such a network would offer the fastest mobile-Internet connections in the nation, potentially beating larger rivals AT&T and Verizon Wireless to the punch.
Yet Clearwire (CLWR) needs to strike a deal to combine resources with Sprint, the only major U.S. carrier to pursue a WiMax strategy, analysts say. Otherwise the company would lack the funds necessary to create a speedy mobile network stretching from coast to coast.
Sprint and Clearwire signed a joint-venture agreement last year, but the tentative deal collapsed after Gary Forsee was ousted as Sprint's chief executive. Forsee was a strong supporter of the WiMax initiative.
Since then, Sprint's new CEO Dan Hesse has looked for ways to reduce the struggling wireless-phone company's costs. The WiMax division is viewed as an area where the carrier can save money.
Sprint also has reportedly considered a plan to combine its WiMax division with Clearwire in a separate venture. The companies might also seek greater financial support from chip-making giant Intel, a strong supporter of WiMax. Motorola is another major technology company in the WiMax camp.
Clearwire CEO Ben Wolff said Tuesday in a conference call with analysts the company has held regular discussions with Sprint and that "significant progress" has been made. He did not offer further details.
Until such a deal is announced, analysts say Clearwire stock is likely to lag. The four-year-old company, formed in 2003, has never made any money. The company went public last year at $25 a share, but the stock now trades below $15.
"The company is essentially in a holding pattern as it negotiates a transaction with Sprint . . . and seeks an investment to fund the buildout of a nationwide WiMax network," wrote analyst Walter Piecyk of Pali Research. "The near term results are weak but frankly they are somewhat irrelevant at this point as the company is in a cash conservation mode."
In the fourth quarter, Kirkland, Wash.-based Clearwire reported an operating loss $83.1 million, compared with a loss of $62 million in the year-ago quarter. The operating figures are adjusted for interest, taxes, depreciation and amortization.
The company's per-share loss totaled $1.19.
Revenue rose 48% to $45.4 million from $23.7 million a year earlier.
Analysts surveyed by FactSet Research were expecting the company to lose $1.04 a share on $45.9 million in revenue.
The company added 47,000 net customers -- below Wall Street's expectations -- to finish the year with 394,000 subscribers.
Yet churn, or the percentage of customers who quit service, remained stuck at a relatively high level of 2.4%. Successful carriers typically have churn rates well below 2%. Verizon Wireless, for example, has a churn rate of around 1%.
For 2008, Clearwire offered a cautious forecast. The company predicted that revenue would rise 36% to 42%, to a range of $205 million to $215 million. That fell well short of Wall Street's estimate of $266 million, according to FactSet.
Last year, the company generated $151.4 million in sales.
The company also predicted it would end the year with 510,000 to 530,000 wireless customers. That would represent growth of as much as 36% at the high end of the range.
Clearwire stock was last down 4.34% to $13.87.
(END) Dow Jones Newswires