Did Clearwire Bet on the Wrong Horse?

Clearwire (Nasdaq: CLWR  ) was born to bet big on WiMAX wireless broadband technology. But maybe that's the wrong horse to choose in the race between WiMAX and LTE -- and Clearwire is only now coming around to that conclusion.

CEO Bill Morrow took the stage for a keynote at the CTIA wireless association trade show and ended up giving me that impression. In response to questions from the show floor, Morrow noted that he can see the rivaling LTE and WiMAX solutions merging into one technology down the road, and that his network was built to accommodate installing LTE equipment alongside the WiMAX stuff if need be.

These admissions smell like desperation to me. Clearwire is the current leader in 4G technology after getting a leg up on the competition with early installations. Still, Clearwire aims for 120 million potential customers served by the end of the year, while Verizon (NYSE: VZ  ) Wireless is looking at 100 million customers reached by the same signpost, using the LTE standard.

AT&T (NYSE: T  ) is lagging behind a bit, but it has the advantage of running a 3G network that uses similar technology to the new 4G upgrade, so it can grow in pieces rather than replacing the old network with an entirely new one (which is what Verizon is doing). WiMAX is big in Europe and Asia, but Clearwire is American and can't go by international trends.

The fact that the two largest networks in North America are going with LTE should make Clearwire nervous. Since the two 4G technologies are incompatible with each other today, don’t look for many consumer-ready gadgets that can connect to both of them. And since LTE has a much bigger footprint in the not-too-far future, it stands to reason that Clearwire's WiMAX could be the odd technology out in many cases.

Clearwire has the blessing and financial backing of several very smart partners, including Google (Nasdaq: GOOG  ) , Intel (Nasdaq: INTC  ) , and Comcast (Nasdaq: CMCSA  ) . But even smart people make bad bets sometimes, and I believe that Google, champion of the eternal underdog, would invest in an LTE provider if that were the less-accepted alternative. Or if, like Clearwire’s WiMax, LTE were being sold to consumers in data-only packages.

The technical feasibility of making LTE and WiMAX sing the same song escapes me, but the fact that Morrow is asking for it makes me nervous for his sake. Will WiMAX make it big or fizzle out, dear Fool? Share your insights in the comment box below, please.

Fool contributor Anders Bylund owns shares in Google, but he holds no other position in any of the companies discussed here. Mind your manners and share a comment -- Anders did say "please." Intel is a Motley Fool Inside Value pick. Google is a Motley Fool Rule Breakers recommendation. The Fool has created a covered strangle position on Intel. Motley Fool Options has recommended a buy calls position on Intel. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


Read/Post Comments (8) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 26, 2010, at 6:25 PM, ddeleo wrote:

    ...this is getting old. That Wimax is IEEE should be plenty for it to be more viable than LTE. Open source testing alone for independent companies turn around time in product will make product cheaper, and creativity easier. wimax2 IEEE coming this summer will make it as fast as anything LTE can put on the table. Clearwire's infrastructure already exist in marketable environments in 27 locations for 30 million people to access. There is no sign of Verizons LTE infrastructure. Which means, if they are starting from scratch with this infrastructure (which I did not know), if they pop up out of nowhere all of a sudden, they still have to deal with the lack of experience from not having yet gone through troubleshooting/mistakes/problems phase of the project, which only comes from real world scenarios. That could make them look very very bad when they throw the on switch. Wimax on the other hand as noted is already all over the globe and Clearwire has learned from all that real world experience as well as their own. LTE has 0 experience to date to model from. Also, Verizons LTE bandwidth will be a trickle compared to Clearwires Wimax. This again will be discovered when the LTE on switch is thrown. For bandwidth is the make or break item when it comes to all the demand that both LTE and Wimax are inviting.

    This is not the first time Clearwire has stated they could go LTE anytime. Thats good business sense. If thats the direction of the market, then thats what a good business person would do. They have options. There is no dead-end for this company because of it. What seperates companies is the wisdom to be strategically already in a position to go with the market when it changes. Thats a strong management team. Ready for the what-if's is what you want in management. Why look at that as a weakness?

    Until the Market dictates the direction, wimax is now, it is live, it is real, LTE is nowhere in sight.

  • Report this Comment On March 26, 2010, at 7:22 PM, Drmcoy wrote:

    It isn't that Google is always for the underdog. They are looking for market growth. I would not be surprised if they supported BOTH Wimax and LTE.

  • Report this Comment On March 28, 2010, at 3:08 AM, wisertwin wrote:

    There is nothing in stone that says CLWR cannot deloy dual-mode technology with support for both WiMax and LTE. Don't forget, VZW, has a CDMA2000 network, which is incompatible with the evolutionary path to LTE. That fact hasn't prevented them from making money on the current 3G and switching to LTE. Then, why is it inconceivale that CLWR won't be able to support LTE or its more evolved form?

  • Report this Comment On March 28, 2010, at 3:12 AM, wisertwin wrote:

    700MHz base station antenna should be easily discernable as they are bigger in size. Have anyone spotted these antennas anywhere?

    I haven't.

  • Report this Comment On March 28, 2010, at 2:06 PM, Rushster wrote:

    700mhz antenna's are no bigger than the current 850mhz or 1900mhz now in use.

    @ddeleo-LTE will also be an open architecture so that argument is mute. As a matter of fact I believe the 4G standard as will be officially written will mandate that.

  • Report this Comment On March 28, 2010, at 4:51 PM, wisertwin wrote:

    Time to market is key. I got hooked up by DSL because it was a only available fixed line broadband at that time. Later cable broadband came along. So what? I'm still using my DSL. Do I know I can better speed with cable modem? Of course. But, I'm happy with my DSL in terms of speed and pricing. And, too lazy to switch. I won't be surprised if CLWR draws in millions of users as they planned.

  • Report this Comment On March 29, 2010, at 4:19 AM, wisertwin wrote:

    Wrong horse or not, Clear just announced WiMax offering in Houston, TX, starting today. Good news for residents in Houston, indeed.

  • Report this Comment On April 13, 2010, at 4:28 PM, jriesenw wrote:

    It’s difficult to be the wrong horse when it’s the only horse on the track. Once that Clydesdale LTE comes forward we can talk about who's betting on which. Until then it's a one horse race which are odds I would love to see at the race track.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1138681, ~/Articles/ArticleHandler.aspx, 10/30/2014 12:27:11 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement