Clearwire's Costly Connections

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

There's a great scene in the 1983 movie The Right Stuff in which astronauts Gordon Cooper (played by Dennis Quaid) and Gus Grissom (played by Fred Ward) explain the economics of the space race.

Cooper: "You boys know what makes this bird go up? Funding makes this bird go up."

Grissom: "He's right. No bucks, no Buck Rogers."

I mention this by way of introducing Clearwire's (Nasdaq: CLWR  ) second-quarter earnings results because, if ever there were a project that needs funding, it's the nationwide WiMAX network that Clearwire and Sprint Nextel (NYSE: S  ) have planned. A broad partnership that includes Intel (Nasdaq: INTC  ) , Google (Nasdaq: GOOG  ) , Comcast (Nasdaq: CMCSA  ) , and Time Warner Cable (NYSE: TWC  ) has committed more than $3 billion to the project.

So far, the effort is paying off. Clearwire added 48,000 subscribers during the first quarter and 18,000 more in Q2. Revenue increased by 65%.

The bad news? Acquiring subscribers is expensive: $404 per addition, to be precise. That figure was down from $471 per last year, but over the same period, gross margin slipped to 28% from 34%. Meanwhile, Clearwire's per-share net loss rose from $0.72 to $1.21, and cash and short-term investments are down from $943.8 million in December to $528.1 million today.

Motley Fool CAPS investors know it takes funding to be a WiMAX leader. But that, apparently, is exactly what makes them skeptical of Clearwire:



CAPS stars (5 max)


Total ratings


Bullish ratings


Percent bulls


Bearish ratings


Percent bears


Bullish pitches


Bearish pitches


Data current as of Aug. 8, 2008.

"While it's going to be hard to underperform the S&P over the next year, the massive amounts of debt and poor [earnings per share] will depress this stock's price," wrote CAPS investor Zikar last month. "I would get in after the restructuring of the debt!"

Agreed. Deep-pocketed members of the tech industry have a lot to lose if WiMAX, and thus Clearwire, fails. They won't let it; Clearwire is going to get all the funding it needs.

Get your clicks with related Foolishness:

Intel and Sprint and Nextel are Inside Value picks. Try this market-beating service free for 30 days. There's no obligation to subscribe.

Fool contributor Tim Beyers owned shares of Alvarion and Google -- and had a position in Google's LEAPs -- at the time of publication. He hunts for tech's best as a contributor to Motley Fool Rule Breakers, which counts Alvarion and Google among its holdings. Get access to all of his writings, or enjoy a daily dose of his Foolishness with this feed for your RSS reader. The Motley Fool's disclosure policy always preferred Flash Gordon to Buck Rogers.

Read/Post Comments (0) | Recommend This Article (1)

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.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

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: 703855, ~/Articles/ArticleHandler.aspx, 10/24/2016 3:36:52 AM

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...

Today's Market

updated 2 days ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
CLWR.DL $0.00 Down +0.00 +0.00%
Clearwire Corp CAPS Rating: **
ALVR $0.00 Down +0.00 +0.00%
Alvarion CAPS Rating: No stars
CMCSA $64.06 Down -0.29 -0.45%
Comcast CAPS Rating: ***
GOOGL $824.06 Up +2.43 +0.30%
Alphabet (A shares… CAPS Rating: *****
INTC $35.15 Down -0.28 -0.79%
Intel CAPS Rating: ****
S $6.55 Down -0.17 -2.53%
Sprint CAPS Rating: **
TWC.DL $0.00 Down +0.00 +0.00%
Time Warner Cable CAPS Rating: **