The technology world loves WiMax, the ultra-high-speed wireless broadband technology. Wall St. hates it. The two biggest proponents of the system in the US are Sprint (S) and Clearwire (CLWR). Over the last three months, Sprint’s shares are down well over 15% and Clearwire’s are off 30%.
The big problem with WiMax is that it is expensive to build out a national network that can service as many people as standard cellular technology can. Sprint (S) has said it is committed to spend $5 billion over the next three years to complete its network. Clearwire may need to put up at least that much money to finish its national footprint.
But, now word comes that the board at Sprint is considering either buying Clearwire, or spinning the No.3 US cellular phone company’s WiMax operations out and merging them with Clearwire. CLWR has an impressive list of large investors including Intel (INTC) and Motorola (MOT). These firms stand to lose a great deal if WiMax deployment gets slowed down.
As The Wall Street Journal points out "a publicly traded WiMax spin-off would satisfy Sprint investors who are skeptical of WiMax, but would allow investors who are bullish on the new and relatively untested technology to make a bet on it."
Any combination of Sprint and Clearwire is likely to get financial support from Intel and other large tech companies that are betting that WiMax will become a global standard. A merger of Sprint and Clearwire could save hundreds of millions of dollars in capital spending. The only question is what are the two companies waiting for?
Douglas A. McIntyre
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