I would think that if I owned a stock, a speculative non profitable
stock such as CLWR, that the analysts said had 5 years before it ran out
of gas, I'd keep that stock. Probably buy more. So says others.
http://finance.yahoo.com/q/ao?s=CLWR
Peter R. wrote:
I find it funny that CITI has been marking all these tech companies as
sell before burned, yet their clients were involved in the IPO's.
http://www.fool.com/investing/value/2007/03/12/clearwire-burns-cash-churns-investors.aspx
March 12, 2007
Mobile mogul Craig McCaw's latest venture, wireless Internet service
provider *Clearwire* (Nasdaq: CLWR
<http://quote.fool.com/summary.aspx?s=CLWR>), raked in $600 million last
week in its IPO. It sounds like a lot of dough, but Clearwire's shaky
business model, fierce rivals, and expensive operations will likely
require even more cash over the next few years.
Clearwire is the second-largest holder of the 2.5 GHz licensed spectrum,
which reaches roughly 214 million people in the United States. The
spectrum allows for data transfer speeds equivalent to wireline
broadband, with far less potential interference than Wi-Fi or other
wireless approaches.
The success of Clearwire's network depends upon the adoption of WiMAX
technologies. If computer and mobile device manufacturers agree to use
the WiMAX standard, the value of Clearwire's network should increase.
The company has attracted $1.1 billion in strategic investments from
*Intel*, *Motorola*, and Bell Canada.
That all sounds promising, but Clearwire's strategy is hardly unique.
*Sprint Nextel* is deploying its own WiMAX network, while *Verizon* and
other wireless providers employ competing technologies.
Clearwire's enormous investment requirements pose an additional problem.
The company shelled out $300 million for 2.5 GHz spectrum rights from
*AT&T*, and it will likely need to buy more spectrum. It also faces
significant expenses in sales and marketing, customer service, equipment
purchases, maintenance and R&D.
To finance these efforts, Clearwire has issued two secured notes, a term
loan and a corporate loan, for a total of $755.6 million. Assuming no
recapitalizations, the company will pay $84.3 million and $1.3 million
in interest and principal, respectively, in 2007.
What business model does Clearwire offer to justify these expenses? The
company sells one- or two-year contracts, including activation fees,
monthly charges, and ancillary services like VOIP and Web hosting. For
2006, the company increased its revenue by $66.7 million to a total of
$100.2 million, but on the bottom line, it sustained a $284.2 million loss.
According to its prospectus, Clearwire expects its losses to continue
for some time. It predicts a whopping $800 million in cash needs for
2007 -- and that doesn't even include spectrum costs.
Even if Clearwire doubles revenues in 2007, the company will quickly
devour its IPO proceeds, and it'll probably need to go back to investors
for more. That's a scary prospect for investors, so it's not surprising
that the stock is already volatile, with a 10% drop on Friday and
another 8% drop in Monday trading. For Foolish investors, it's probably
a good bet to stay clear of Clearwire.
--
George Rogato
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