Player Avatar TSIF (99.96) Submitted: 10/8/2011 2:18:18 PM : Underperform Start Price: $1.75 CLWR.DL Score: +24.50

It's hard to chase a falling knife, sometimes there are buyers waiting in the wings to bargain shop after a rocky day like Clearwire Corp was having on Friday (7 Oct, 2011), but Sprint so clearly tossed them to the wolves I didn't see a white knight in the wings until things settle down and someone works on triaging the damage.

"With friends like these who needs enemies" must have been ringing through Clearwater Corp headquarters Friday when without warning or a chance to prepare Sprint mouthed off to analysts that when they finished their buildout, they wouldn't need Clearwire Corp's outdated technology. Even worse, in advance of their own 4G network they would stop selling phones that worked on the Clearwire network! Ouch!!! Clearwire's WiMax network is considered outdated and Sprint is their only support.

While overvalued by most metrics, I had left Clearwire Corp alone here on Caps based on their partnership with Sprint. (Sprint has 54% majority ownership). There is a question whether Sprint's new partner Lightsquared can deliever on the frequency range needed for the new spectrum.

I don't believe Sprint can exist without Clearwire for several years at least and Clearwire will benefit from additional bandwidth loading of the iPhone. Clearwire is working on an upgrade plan of it's own. If Clearwire was more profitable and Sprint less reliable on thier business plan this might be a buying opportunity for Clearwire, but Clearwire already appeared excessively valued before Sprint tossed them under a bus. It might be that Sprint is hoping to buy more Clearwire at a discount price, but I can't give them credit for being that smart, even if it is a devious sort of Smart. If so,
It could be that Sprint values Clearwire's spetrum more than the infrastructure.

EIther way, Clearwire still needs to raise money for a network that no one might use. Clearwire is selling at about 50% book, but with negative margins, negative cash flow, and a bleed that even with Sprint's current income needs a tourniqet in a big way. A loss of $500 Million last year is substantial for a company this size and it piles onto multiple year losses. Revenue has been rising sharply QoQ this past year but so have expenses. The $1.4 Billion they borrowed last quarter makes $4B in total debt and is putting a strain on the limited cash.

Without some hope of financing a build out and more important, some hope of having sufficient useage to pay for it, I don't see much hope for Clearwire in the long run....with or without an insane partner who tosses them under a bus (along with themselves) in a room full of analysts with a slide deck of ill conceived, incomplete, business plans.

Target?? Hard to call a bottom on a downthumb with an equity that dove 35% in one day to a new all time low. If it breaks $1 before getting propped up or finds it hard to get investors then it's going to be a hard road to travel. Hard to believe Clearwire was $32 per share summer of 2007, but lesson noted that you can't value a company on past performance, especially one in an evolving communications industry.

Member Avatar TradeDragonfly (68.49) Submitted: 10/10/2011 6:21:26 PM
Recs: 0

I couldn't agree with you more. CLWR was speculative at best before Sprint through them out, and because of Sprint's majority holding on them, it may be possible that this company will be bought for next to nothing. Alone this company does not have the tools to survive, so the only option for them is a buy-out, which doesn't seem likely. I feel bad for their shareholders. They have been thrown to the wolves as well.

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