Clearwire Shares Plunged Again: What You Need to Know

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What: This has to be getting tiresome. After big declines in June, July, and August, shares of Clearwire (Nasdaq: CLWR  ) closed down another 11%. This time, worries over the cost to bring Apple's (Nasdaq: AAPL  ) iPhone to its parent carrier, Sprint Nextel (NYSE: S  ) , appears to have caused the selloff.

So what: Like a climber stuck in an avalanche, investors sold on fears that fresh commitments to Apple could leave Sprint unable to provide additional financing to cash-strapped Clearwire.

Now what: It's a fair concern. The WiMAX specialist's debt is virtually equal to equity and 50% of total capital as of this writing, a structural weakness that begs for help that Sprint isn't in a position to provide. Do you agree? Would you buy shares of Clearwire at current prices? Please weigh in using the comments box below.

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 owned shares of Apple at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

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  • Report this Comment On October 05, 2011, at 12:23 PM, JaxBeans wrote:

    The cash crisis experienced at this critical juncture in Clearwire's relative infancy (by infancy, I mean in tech terms, relative to say, Intel), but definitely concerning. The potential recipe for disaster almost seems overwhelming against Clearwire:

    Start with Sprint so heavily invested in the introduction of the updated (but lackluster, in my opinion) i-Phone 4Gs, and though snagging the i-Phone is a strategic long term win for Sprint, the Apple deal creates an even more cash strapped situation for the "Now Network" - and in turn for Clearwire.

    Mix in the potential AT&T/T-Mobile deal - or at the very least the possibility that T-Mobile will emerge $3B richer, if the deal doesn't go through. Sprinkle in any other myriad of variables - slower than expected LTE Advanced build out, newer technology, additional funding shortfalls/delays, etc., etc. - and Clearwire could become yesterday's burnt toast...but...

    That being said, I more than doubled my position in Clearwire yesterday afternoon when the price dropped after Sprint wasn’t featured prominently in Apple’s presentation.

    IMHO Clearwire is a great buy right now based simply on the value of three things. 1) The intangible: Clearwire holds invisible (but highly coveted) spectrum - a lot of it. 2) The tangible: A strong management team with a long term vision (a Gardner favorite) - and a solid plan how to get there. It doesn't hurt that John Stanton, one of the Godfathers of telecom, sits at the helm of Clearwire's board. 3) Sprint. The #3 carrier holds a sizeable stake in Clearwire, and in the long run Sprint needs Clearwire as much as (or maybe more than) Clearwire need's Sprint. Plus Clearwire has other financing options should Sprint be too busy selling i-Phones.

    Cale Smith makes the case for Clearwire better than anyone I’ve read in a while. Check out his extensive write up for a more in depth explanation. http://seekingalpha.com/article/296393-a-value-investor-s-ca...

  • Report this Comment On October 05, 2011, at 8:27 PM, larrysd1 wrote:

    If I had any money left I would purchase more shares of CLWR.

    Thanks,Motley

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