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

 

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