Is Clearwire Finally Safe To Buy? Or Is Sprint?

Clearwire Corporation (NASDAQ: CLWR) is seeing a big gain after the wireless 4G data network operator managed to report earnings in line with expectations and somehow managed to boost its guidance.

The company’s quarterly operating loss fell to $311.3 million from $911.6 million a year ago, but the problem is that sales were down almost 2% from a year ago to $316.9 million.  The improvement in net results was on lower operating expenses.

It is nearly impossible to mention Clearwire without discussing Sprint Nextel Corporation (NYSE: S) as the dominant force over the company. Sprint’s stock is up 5% at $4.25 on the day after UBS raised the rating to Buy this morning.

The picture from analysts so far today is not exactly the biggest endorsement.  Remember, shares hit a new low just this week over fears that it might be running out of cash.  Wells Fargo maintains that Clearwire’s survival remains at stake as it has a year or so of cash to survive on.  The company is trying to strike deals and it may sell some of its spectrum licenses.  Evercore also maintains that liquidity is the company’s biggest issue.

At 1:00 PM EST we have seen some 13.9 million shares trade hands (average day is 10.6 million shares) and the stock is up 8.9% at $1.10 against a 52-week range of $0.83 to $3.50.

The equity value (market cap) is still $541.7 million in Clearwire, but the company’s long-term debt on a net basis was listed as $4.243 billion at the end of June.

Here was the 2012 guidance: “For full year 2012 Clearwire expects total revenue of $1.20 to $1.30 billion, representing a $50 million increase (at the midpoints) to previous guidance of $1.15 to $1.25 billion. The company also expects 2012 Adjusted EBITDA loss of approximately $(175) to $(225) million, representing a $100 million improvement (at the midpoints) to previous guidance of $(250) to $(350) million.”

A gain of almost 10% sounds great, but the real future depends upon how much debt it can widdle down and how much it can raise from spectrum sales and how much it can grow its carrier base.

JON C. OGG