Clearwire Takes a Dip

4:20 PM -- In case you missed it, Clearwire LLC (Nasdaq: CLWR) went public last week, and much was made of the fact that the stock almost immediately declined. It’s still declining as I write this.

Pay this no attention whatsoever -- unless, of course, you are an investor. And, for the last time, I am not. I don’t own wireless stocks, OK? Sorry -- latent sensitivity. Anyway, discussion with some of our Wall Street clients led me to the conclusion that the offering was fairly priced. And that price did spike a bit on the first day, as I expected, but not as much as I expected. The valuation of Clearwire, above all else, is in the spectrum it owns. And the stock declined largely because of the reality of just how much that spectrum costs. (See Clearwire's Bubble Bursts.)

And the fortunes of Clearwire have little to do with those of WiMax, at least in the near term. Clearwire is going to migrate its technology to mobile WiMax over time. But this doesn’t have to happen right away, and a staged evolution, while expensive, is certainly possible and a very reasonable strategy. But that issue of WRT spectrum cost is the big one -- it’s going to take a phenomenal amount of money to build any operator these days, and Clearwire, despite billions raised, is going to need even more. And Clearwire is losing money, and will lose more over the next few years.

If you want to be in this business, you just gotta believe. I met Craig McCaw a few years ago and asked him how he decides to get into new ventures. As it turns out, he doesn’t do a lot of detailed market research; he goes with what sounds good after basic investigation and due diligence. His strategy is to get there first. And he’s made billions with both cable TV and cellular. Clearwire has a long road ahead of it, and what happens on any given day this March is unlikely to matter very much.

— Craig Mathias is Principal Analyst at the Farpoint Group , an advisory firm specializing in wireless communications and mobile computing. Special to Unstrung

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