Clearwire Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Clearwire (Nasdaq: CLWR  ) slumped more than 12% in early trading on what appear to be ongoing fears that Cox Communications' retreat from plans to build a wireless network could have broad implications for the industry in general and Clearwire in particular.

So what: Cox, which had planned to go head-to-head with AT&T (NYSE: T  ) in major markets, now plans to sell its wireless infrastructure and partner for service. The implication? Investing in wireless costs too much and promises too little return.

Now what: Cox isn't saying that specifically, but Clearwire's ongoing quest for external financing appears shows no signs of ending soon. And while competitor LightSquared's troubling report to the Federal Communications Commission should have raised hopes for Clearwire, investors have shown little interest in the stock. I can't blame them. Why buy when company founder Craig McCaw is dumping shares? Wait for Clearwire to report material financial progress before taking another turn at this stock.

Interested in more info on Clearwire? Add it to your watchlist.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out his portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader.

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  • Report this Comment On June 17, 2011, at 6:07 PM, Red777aetrof wrote:

    I think the real reason is that leaked news that LightSquared finally signed its network sharing agreement with Sprint (confirmed by Bloomberg based upon Harbinger letter to its LP's) which potentially puts CLWR at strategic and competitive disadvantage with respect to its largest customer and shareholder. Probably selling is overdone but I doubt how Cox exited its facilities-based retail strategy versus CLWR's strategy has any relevance to each other. If anything Cox is entering MVNO with Sprint (albeit on 3G only since that's what Cox's customers were using) which may ultimately translate to future wholesale potential on CLWR (or LightSquared now it seems).

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