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As Clear As Mud

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14

January 24, 2010 – Comments (2) | RELATED TICKERS: CLWR.DL , GOOGL , VZ

The technical term is IEEE mobile Worldwide Interoperability of Microwave Access 802.16e-2005. The term we found during our research was WiMAX. We knew it wasn't going to be this simple, and we were right. We also found LTE, which we learned stands for Long Term Evolution.

LTE appears to us to be the main competitor to WiMAX and is being introduced by the wireless division of Verizon Communications (NYSE: VZ) in the United States market in 2010.

The main difference between WiMAX and LTE appears to be speed, with LTE providing faster data speeds at lower cost than WiMax.

However we found several wireless analysts that agree that the first devices capable of accessing LTE networks will be laptop computers equipped with small modems, known as dongles, and that LTE ready smart phones and other products will not be available until at least 2011, but more likely, not until 2012.

At the moment there appears to be no clear leader in WiMAX technology, however Clearwire Corporation (Nasdaq: CLWR) appears to us to be the front runner at the present time. But even Clearwire has put itself in a position to move to LTE over the longer term.

This whole WiMAX versus LTE thing sounded like another VHS versus BETA, or HD DVD versus Blu-ray to us, but since we were asked about Clearwire Corporation we grudgingly forged ahead.

In the end to those of that simply want to make a cell phone call, the technology behind the call, will come down to price, and at the moment, price is as unpredictable as which technology will emerge the leader.

Basis
Financial information contained in this report is based on the company's most recent Form 10-K filing for fiscal year ending December 31, 2008 as filed with the with the Securities and Exchange Commission on March 25, 2009, as amended on April 13, 2009.

What They Do
The company offers a suite of advanced high-speed Internet services to consumers and businesses. As part of a multi-year network build-out plan, the company's 4G service, called
CLEAR™, will be available in major metropolitan areas across the U.S., and bring together a combination of speed and mobility via the company's open all-IP network.

Combined with significant spectrum holdings, the company provides network capacity to deliver next-generation broadband access.

Strategic Investors
Strategic investors in the company include Google, Inc. (Nasdaq: GOOG), Intel Corporation (Nasdaq: INTC), and Comcast Corporation (Nasdaq: CMCSA) .

Sprint Nextel Corporation (NYSE: S) is the majority stock holder, controlling 51.1% of the ownership interests in the company.

For a detailed explanation of the company's structure and formation, please click here.

Short-Term Investment
With a recent close of $6.77, and first resistance of $9.42, the stock currently has an upside reward of 39%. Conversely, with first support at $6.36, the stock currently has a downside risk of 6%. This tells us that a short-term trade at this point may not be a bad choice.

However, in reviewing the current trend line we note that the while the recent price movement appears to be downward with shares in the oversold category, the overall short-term trend for the stock appears to be upward.

Long-Term (5 Year Hold) Investment
Simply put, the company ended fiscal 2008 cash rich, with $1.67 a share cash on hand, $2.63 a share of marketable securities, and debt of $1.89, giving the company a debt to cash ratio of 0.44, an outstanding position for companies in the wireless commuincations industry.

Additionally, the company's fiscal 2008 working capital ratio was over 18, the company's quick ratio was over 18, and the company's cash ratio was over 18, all extremely positive.

Certainly would like to see free cash flow improve from ($1.47), but realize that with the current move to WiMAX, it may be sometime before that happens.

We also note that the first 3 quarters of fiscal 2009 have seen changes in the company's financial position, with cash on hand falling to $0.66 per share, marketable securities remaining high at $2.04 per share, and debt remaining almost unchanged at $1.95 per share.

Final Thoughts
We realize that fortunes have been made over the past 10 years gambling on one technology over another, and believe that for long-term investors, this will simply be another of those gambles, a gamble we at Wax Ink are simply not willing to take at this time.

Wax

For the Clearwire Wax Ink Raw Value worksheet, please click here.

2 Comments – Post Your Own

#1) On January 24, 2010 at 10:57 PM, TDUBFISH313 (< 20) wrote:

They are advertising like crazy in the chicago metropolitan area. I was thinking of picking up some shares.

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#2) On January 25, 2010 at 4:41 AM, wax (97.63) wrote:

TDUBFISH313;

As a short-term investment, picking up some shares now is probably not a bad play, but if it's long-term you after, you are going to have to follow the events in the wireless sector pretty close to be successful. Something we simply aren't interested in doing.

Good luck with the stock if you add it to your holdings.

Wax

 

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