Clearwire: The Post IPO Good-Time Blues
May 10, 2007
"You have to spend money to make money" is the providers lament as it reports earnings for the first time since going public.
Reporting what it calls record first quarter 2007 results -- and it would be a record, since its the companys first post-IPO public report -- Clearwire
of Kirkland, Washington said it had more cash flow positive markets, a customer growth record with 41% more new subscribers than in Q1 of 2006, and revenue of $29.3 million (three times what it had last year in Q1).
The problem is, thats only 10 cash-flow positive markets (up from 4 last year) out of 37 markets Clearwire has service in. 41% growth is good, but the company still only has 258,000 paying subscribers -- thats 2.5% of the potential customer base. And the revenue doesnt make up for a loss of $51.5 million after taxes -- compared to losing $33 million in Q1 06.
The company now has the potential to serve as many as 10 million customers in the U.S. and Europe, with over 1,300 WiMax or pre-WiMax equipped towers in service. It wants to reach 125 million paying customers in the next five years -- but that means spending a lot more. The Seattle Times says the company needs to spend $1.6 billion just to finish deployment. Thats in addition to the $1.5 billion it has on hand.
Clearwire got big bucks last year from Intel and Motorolas investment arms, to the tune of $1.26 billion. It raised another $600 million with its public offering in March, but had a rocky start. The stock is down about 25% from its opening.
Last week, Clearwire received Federal Communications Commission (FCC) approval for a laptop PC card it calls WiMax-class that it will start selling later this year. The card is made by Motorola, but is not 802.16e-based -- thats the IEEE standard WiMax is based upon. Instead, it only supports the proprietary Expedience network created by NextNet -- a company bought by Clearwire and then sold to Motorola at the same time that Moto Ventures provided a few million in funding. Clearwire has deployed Expedience technology in 13 states, according to Network Computing.