3 Things to Watch With Clearwire

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Clearwire (Nasdaq: CLWR  ) provides fourth-generation wireless broadband services for residential and mobile users throughout the United States.

Today, let's look at three things investors should be watching regarding Clearwire, as they will provide us better insight into the company.

1. Clearwire's partnership with Sprint
Clearwire is, as I've alluded before, the redheaded stepchild that Sprint Nextel (NYSE: S  ) never wanted but can't seem to get rid of. As Sprint's largest customer, Clearwire has received in excess of $2 billion to invest in its WiMAX and 4G LTE technology by Sprint over the past couple of years in order to keep Clearwire afloat and to aid in the build-out of its broadband networks.

However, Sprint has had a much different outlook on where it wants to take its 4G network. Sprint plans to completely stop making devices capable of running on Clearwire's technology after 2013. Originally Sprint had planned on going with LightSquared's 4G network, but the FCC put its foot down multiple times on LightSquared technology after noting its interference with GPS receivers. It's apparent that Sprint isn't satisfied with Clearwire's technology or progress, so investors need to stay abreast on this shaky partnership and keep up on what other possible partners Clearwire may have.

2. Spectrum wars
Let's face it, the real value of Clearwire is buried deep within its spectrum assets. Although Clearwire's assets lie predominantly in the 2.5 Ghz to 2.7 Ghz range, which isn't as desirable as other spectrum ranges, it still could garner a significant chunk of change from selling some or all of its assets.

It's also worth noting that spectrum demand and supply could have a huge bearing on what Clearwire could gain from selling part of its spectrum. At the moment, spectrum is in demand, but there are also companies willing to supply it if needed. DISH Networks (Nasdaq: DISH  ) is one such company that has excess spectrum that it could easily sell or lease at the moment. In addition, struggles at both MetroPCS Communications (NYSE: PCS  ) and Leap Wireless (Nasdaq: LEAP  ) , which have both been losing money and burning through subscribers, could be the impetus that leads a larger telecom like Sprint or AT&T to simply buy the spectrum it needs. That was the purpose behind AT&T's proposed, but failed, purchase of T-Mobile in 2011 -- to gain access to more spectrum.

As long as spectrum remains available, immediate sales of spectrum may not yield the best results for Clearwire.

3. The dreaded D-word
We can't talk about Clearwire without first talking about the mountain-high pile of debt that it's currently contending with. You might feel pretty safe as a Clearwire shareholder in knowing that the company has $1.2 billion in cash, but considering that it's averaged a free cash outflow of nearly $1.9 billion over the past five years, that isn't going to last the company very long at all.

On top of burning cash on a daily basis, Clearwire must also deal with nearly $4.3 billion in debt. In addition to dealing with interest expenses which add a further drain on its cash, Clearwire is on the hook to repay... get this... $2,947,724,000 in debt in 2015. I'll give you a moment to pick yourself up off the floor.

Clearwire has no choice but to act now and work toward restructuring its debt or selling some of its assets, because that may not be a viable option one year from now. This situation bears watching.

Foolish roundup
Now that you know what to watch for, it should be easier to analyze Clearwire's successes and failures in the future and hopefully give you a competitive investing edge.

If you're still craving even more info on Clearwire, I would recommend adding the stock to your free and personalized watchlist so you can keep up on all of the latest news with the company.

Clearwire's attempt at building a game-changing 4G LTE network has been less than inspiring. However, our team of analysts at Stock Advisor has identified three companies that appear set to lead the new technological revolution with the introduction of a new disruptive technology. Find out the identity of these stocks, for free, by clicking here to get this latest special report.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on Motley Fool CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of Apple. Motley Fool newsletter services recommend Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (4) | Recommend This Article (3)

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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 September 14, 2012, at 1:04 PM, spokanimal wrote:

    This was the WORST clearwire piece I've seen this year.

    Regarding the LTE partnership sprint has established with clearwire... not a word of that in your article.

    If sprint "isn't satisfied with clearwire's technology and progress" as you have stated...

    ... then why is Sprint committed to paying clearwire a whopping $350 million incentive bonus for having it's first 5,000 LTE sites operational by next July? There's obviously a sence of urgency there that goes completely over your foolish HEAD.

    Just how sufficient do you think sprint's scrawny 5x5 FD-LTE channel will BE in downtown Manhattan without Clearwire's massive overflow capacity, anyway?

    I'm amazed Motley Fool let you publish that pile of C**p.


  • Report this Comment On September 15, 2012, at 12:29 AM, MattC69 wrote:

    I agree with the previous poster, except that Pimple Mangina posts worse stuff over at WSJ. However, I had to woinder when this article was posted on 09/14/12, and is dated 09/12/12. Why a 2 day delay???

    Notwithstanding, in this case, the author lost all credibility with the statement:

    "Sprint plans to completely stop making devices capable of running on Clearwire's technology after 2013..."

    I didn't know Sprint MADE devices. Someone wanna call Sprint and check that out?!? Even if I ASSUME what the author meant to say, it is completely ignorant of the fact that Sprint's pre-paid subsidiaries Boost and Virgin Mobile ARE loading up on WiMAX devices and are planning to continue doing so. Doesn't sound like Sprint is abandoning CLWR's WiMAX network to me, even if Sprint is going out of the device manufacturing game... ROTFL

  • Report this Comment On September 15, 2012, at 11:50 PM, dmoney712 wrote:

    This article is Absolutelty awful. Sean Williams has no idea what he's talking about.

    3 Things To Watch With Clearwire:

    1.Partnership with Sprint.

    Wiliams: "shaky partnership"

    Truth: Closely partnered. Listen to the colloabortaive discussion regading network compatibility between CLWR CTO and S VP of Network Development at the Wells Fargo Securities 2012 Wireless Spectrum Symposium on July 18, 2012.

    2. Spectrum Wars

    Williams: "CLWR's 2.5 Ghz to 2.7 Ghz range isn't as desirable as other spectrum ranges"

    Truth: 2.5 Ghz to 2.7 Ghz range is much more desirable for data which is where demand is growing exponentially and where the WORLD is heading...Softbank, China Mobile.

    3. The dreaded D-Word

    Williams: "mountain-high pile of debt", ...."averaged a free cash outflow of nearly $1.9 billion over the past five years"...and this one I love.... "On top of burning cash on a daily basis, Clearwire must also deal with nearly $4.3 billion in debt. In addition to dealing with interest expenses which add a further drain on its cash, Clearwire is on the hook to repay... get this... $2,947,724,000 in debt in 2015. I'll give you a moment to pick yourself up off the floor."

    Truth: Okay Sean, I've picked myself off the floor.

    First, adjusted free cash outflow is only a little over 100 million for the year so far.

    Second, Last week, Cochran listed a plethora of strategies and options to deal with CLWR debt, and even referred to an exchange on that debt that is coming due. You don't think a lender would be willing to take a secured interest in CLWR for 2.9B given the underlying value of the spectrum holdings???

    Debt is debt, which means it gets paid first. I'm sure there are plenty of issuers that would happily take that paper knowing how much value there is in the spectrum assests the company holds.

    Please don't submit any more articles.

  • Report this Comment On September 20, 2012, at 4:24 PM, cjmac136 wrote:


    I will not be piling on...I will simple say you have a very little understanding and should avoid further comments concerning the telecommunication industry, you may also want to grab book called Fundamentals of MANAGERIAL FINANCE by Raymond P. Neveu

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