Uncertainty about Sprint Nextel Corp.’s ultimate commitment to WiMax raised questions about the outlook for Clearwire Corp., which has a pending wireless broadband joint venture with the mobile phone carrier. Pali Capital Inc. analyst Walt Piecyk downgraded the stock on Friday, citing a broader array of concerns for Clearwire and for WiMax's near-term performance.
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Sprint and Clearwire announced the JV in September, saying they would collaborate to build a WiMax network covering 100 million people. The deal was supposed to have been finalized in September, but it is not yet complete. The Wall Street Journal reported Friday that Sprint might spin off its wireless unit and merge it with Clearwire. While Sprint is seeking a replacement for ex-CEO Gary Forsee, who left the company in October, any significant WiMax deals may be difficult to consummate.
“We do not believe that Sprint will acquire or complete its existing transaction with Clearwire until it finds a new CEO,” Piecyk wrote in a Friday report. Kirkland, Wash.-based Clearwire would only say that it is still in talks with Sprint about the WiMax venture.
Piecyk suggested that terms of the pact could change. Clearwire could lose access to sell its products in the stores of its JV partner, because Sprint might be reluctant to display another company's products next to its own devices. Sprint could also desire to scale back the WiMax venture, while it addresses problems with its mobile phone operations that have led to customer defections. Though Clearwire's wireless cards for PC's are "superior" to existing cards that use CDMA technology, Piecyk does not believe they have been selling. Clearwire said Friday that it boosted the size of its new bank facility to $1.25 billion, an increase of $250 million. Piecyk still believes the company will have to tap the capital markets with a “sizeable transaction” in the next year.
There are also perennial issues that affect wireless telecommunications.
“In our experience over the past 14 years, the initial launch of a new wireless technology has nearly always been disappointing,” Piecyk wrote. — Chris Nolter
See Nov. 2 story from The Wall Street Journal (subscription may be required)
See Clearwire's funding announcement from Yahoo! Finance
See Nov. 2 Sprint Nextel story from Tech Confidential
See Oct. 12 story from The Deal newsweekly
