Clearwire: The Big Spend

Wireless broadband provider Clearwire LLC (Nasdaq: CLWR) is spending big, growing fast, and losing money hand-over-fist in its bid to become one of the key WiMax players in the U.S.

The Kirkland, Wash.-based firm, which is reporting its first quarterly results after its initial public offering, lost $92.6 million, or 64 cents a share, on revenues of $29.3 million. In the same period a year ago, it lost $55.3 million, or 73 cents a share, on revenues of $22.7 million. (See Clearwire's Bubble Bursts.)

The latest wireless venture from serial investor Craig McCaw, Clearwire also revealed capex spending of $74.4 million on building out new wireless markets during the quarter. It says that its network now covers a potential audience of just over 10 million people in the U.S. and Europe with a total of 1,356 tower sites in commercial service.

Clearwire is spending big -- and losing big -- in a dash to become the dominant WiMax provider before any of its bigger rivals can get a decent foothold in the market. Clearwire's main competition at the moment is Sprint Corp. (NYSE: S), which has pledged to pump $3 billion into its own nationwide mobile WiMax, which is due to come into general service in 2008.

Clearwire says that it added 52,000 net subscribers in the first quarter, an increase of 41 percent over the first quarter of 2006. This means that the company now has approximately 258,000 subscribers in total. It is also hoping to add more customers through an expanded partnership with AOL Inc. (NYSE: AOL) and as it adds a new wireless card for laptops to its portfolio. (See Clearwire Cleared for Takeoff.)

The firm's high-spending ways are likely to continue throughout the year and beyond. Clearwire said in its IPO documents it will need around $800 million to cover its costs in fiscal 2007 -- not including expenses related to buying more spectrum. In fact, it is possible that the company may try and raise more capital if the terms are acceptable. (See Clearwire's Cash Craving.)

Analysts are still mostly confident that Clearwire can maintain this huge burn rate, citing its backing from Intel Corp. (Nasdaq: INTC) and Motorola Inc. (NYSE: MOT), McCaw's ability to raise capital, and Clearwire's early lead in the marketplace.

Opening its coverage of the stock recently, however, Bear Stearns & Co. Inc. predicted that Clearwire still needs an extra $3.3 billion in funding and rated the stock as a "Peer Perform."

Clearwire stock was down 98 cents, or 5.16 percent, to $18.02, on the earnings news.

— Dan Jones, Site Editor, Unstrung

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