It’s always surreal to see clwr report earnings these days, if only because absolutely nobody cares what their results actually are. There are only two positions. Either Clearwire is underfunded and doomed to being crushed by AT&T (NYSE:T, news, filings) and Verizon (NYSE:VZ, news, filings), or we’re just a year or two away from the WiMAX revolution which will break the stranglehold those two have on the entire communications infrastructure. Clearwire’s revenues of $62.1M and net loss of $0.37 per share remain basically irrelevant at this point. The questions revolve around ‘how much did they spend?’ and ‘when do they run out?’
Obviously, they’re going to spend it all so everyone had better get used to it. Without counting additional funds, how much will ‘all’ buy them? Consensus is certainly ‘not enough’, but nobody really knows, there’s a whole lot of guessing going on out there. How much coverage does it take to reach the tipping point? Atlanta goes live in June, and uptake there will be critical. Why do I say that? Because of the timing. If Clearwire is going to raise more money in the winter, they need to be able to point to an obvious success. Atlanta will be their biggest market by far and will have a couple quarters of visible performance by then. Success there will give potential lenders much more visibility into Clearwire’s ability to achieve its potential.
What do they need to do in Atlanta and other early markets to turn sentiment in their favor? In my view, Clearwire needs to access the anti-incumbent feelings that we all know are out there, and turn itself into a phenomenon. There will be few if any LTE devices for at least two years and maybe three, and 3G networks are already being strained by video – as shown by AT&T’s crippling of the Sling app on the iPhone. Two years is an eternity in this business, and we are looking at two solid years of consumers fighting with AT&T and Verizon Wireless over what we can and cannot do on an unlimited 3G data plan that is nevertheless very limited. I don’t think people really understand how ugly that is going to get. For Clearwire to succeed, they need to take that anger and turn it into more and more subscribers in each market they roll out.
If they do that, the funding will be there. But they cannot hesitate, so they are in a position where they must accelerate toward the cliff. In this environment, analysts hate cliffs – hence the negative coverage. But if they find a way to leverage the impatience the market is going to go through over the next 2 years, that will change quickly.
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