The Death Of WiMax: Clearwire Says It May Not Make It

Clearwire (NASDAQ: CLWR), says it may not have enough capital to stay in business. The company is the pioneer of the WiMax 4G technology used by Sprint-Nextel (NYSE: S) for its wireless broadband network.

In its 10-Q, the company said:

Based on our current projections, we do not expect our available cash and short-term investments as of September 30, 2010 to be sufficient to cover our estimated liquidity needs for the next 12 months. We also do not expect our operations to generate positive cash flows during the next 12 months. Without additional financing sources, we forecast that our cash and short-term investments would be depleted as early as the middle of 2011.

WiMax has always been a gamble, and one that Sprint was willing to take to attempt to revive its flagging fortunes. It has been a also-ran in the US mobile market behind AT&T (NYSE: T) and Verizon Wireless and has suffered a slow loss of subscribers since it merged with Nextel. Sprint has believed that if it could be first to market with 4G service that it could steal customers from its larger rivals.

AT&T and Verizon plan to use the more widely accepted LTE mobile broadband technology to launch their 4G networks.

The fate of Clearwire may determine the fate of Sprint which is Clearwire’s largest shareholder. Clearwire will have to raise several billion dollars to remain viable. Sprint does not have that money, and it is hard to see why other companies involved in WiMax or the capital markets would support Clearwire’s future.

Several overseas companies have approached Sprint about a buyout. It is time for the board to listen to those offers, sell the company, and arrange to have Clearwire be part of the package. It is a door into the US market, if a foreign company can afford to take a risk.

Douglas A. McIntrye