WiMax Massacre: Sprint (S) And Clearwire (CLWR) Split-Up

Telecom & Wireless

Published: November 9, 2007 5:52 am

WiMax appears to be such a promising technology, at least on paper. It can send wireless broadband signals for miles from one base-station. If is faster than 3G, the core technology used for cellphone signals by AT&T (T) Wireless and Verizon Wireless.

WiMax can also send signals to PCs and hand-held devices. It is a broadband dream come true. It has the backing of tech giants including Samsung, Intel (INTC), and Motorola (MOT)

The only problem with WiMax is that it is not getting deployed around the US, at least not with any haste.

Sprint was to spend $5 billion to create a WiMax network that would reach 100 million people two years from now. WiMax start-up and recent IPO Clearwire (CLWR) was also building a network. It was probably going to need to spend as much as Sprint planned to. Both companies decided to link up and cooperate on the build-out and allow one another’s customers to have free roaming privileges around the US.

But, Sprint and Clearwire broke off their agreement today. There has been pressure on Sprint to cut back capital spending as its core subscriber base has begun to drop. Sprint’s recently departed CEO was a big WiMax champion.

Whither WiMax now?

For one, the Sprint plans are not dead. What becomes of them may depend on the thoughts of the company’s yet-to-be-located new CEO.

Clearwire’s stock is likely to take an awful beating on the news. But, Intel and others have a tremendous stake in the technology. The chip company is making products that could work in hundreds of millions of devices that would connect to a national WiMax network. Nokia (NOK), Samsung, and Mototola could bring in very large sums building the WiMax infrastructure and providing devices which will operate on it.

Look for a group of companies, perhaps lead by Intel, to put $2 billion or $3 billion into Clearwire. The company’s market cap is only $3 billion, so the money might have to go in as a convertible preferred. That would probably give Intel and its partners de facto control of Clearwire.

But, it will take something at least a bit extreme to keep WiMax in the US on track.

Douglas A. McIntyre

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