Clearwire: 4G Pure Play Is a Risky Bet

BOSTON (TheStreet) -- Clearwire CLWR and Xohm, the wireless broadband unit of Sprint Nextel S, merged in 2008. Clearwire is aggressively building its 4G WiMAX infrastructure, using market clustering in urban areas. Its WiMAX technology offers mobile broadband at speeds often four times faster than 3G. The company's markets include Atlanta, Chicago, Houston, Philadelphia and Washington D.C. Two issues currently face Clearwire: Its first-mover preference for WiMAX may have been a misstep as LTE, or long-term evolution, is emerging as a favored 4G technology. And expanding, though foreseeable, losses are hurting its stock. Clearwire's second-quarter loss widened 72% to $126 million, or 61 cents a share, from a loss of $73 million, or 38 cents, a year earlier. Revenue surged 93%. Gross, operating and net margins remained in deep negative territory. However, Clearwire has $2.3 billion of cash and $2.8 billion of debt. The company predicts coverage capability for 120 million people by the end of 2010. It added 722,000 net new subscribers in the quarter and posted a churn rate of 3.2%. The recently launched iSpot, compatible with Apple's suite of devices, including the iPad, iPod Touch and iPhone, is a "personal 4G hotspot" likely to attract tech-savvy subscribers in urban areas with coverage. Clearwire's stock has dropped 9% since its quarterly release. Its 61 cent per share loss missed the consensus estimate of 53 cents. The top-line tally missed researchers' median estimate by 5.8%. However, the real negativity stemming from the quarterly report is the company's announcement of new trials to test coexistence scenarios between LTE and WiMAX. It is purportedly considering a new hybrid technology, which has hurt sentiment for its already capital-intensive 4G WiMAX build-out. However, the threat from LTE remains latent. Clearwire added new wholesale partner Best Buy BBY during the quarter and boosted its 2010 subscriber forecast to 3 million. To read the rest, head over to TheStreet.com