Foolish Forecast: Clearwire's Hail Mary

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Wireless broadband service provider and recent IPO Clearwire (Nasdaq: CLWR) is cleared to send its first-quarter earnings on May 9. Some investors expect great things from cellular pioneer Craig McCaw's latest venture. Let's take a look at what signals the company's sending.

What analysts say:

• Buy, sell, or waffle? A total of 13 Wall Street analysts follow Clearwire. Of this group, 10 rate the stock a buy, while three put it on hold. In our Motley Fool CAPS investor database, 79 of our 28,000 rated players have a very different outlook on the stock, collectively panning it with the lowest one-star rating.
  
  
• Revenues. On average, analysts predict revenue of $29.2 million.
  
  
• Earnings. The average analyst expects Clearwire to burn through cash like crazy, posting a loss of $0.58 per share.

What management says:
Backed by Intel (Nasdaq: INTC), Clearwire is clearly in a spending mood -- and will be for a very long time. The company states "We are investing heavily in building networks and growing our subscriber base ... This expansion will require significant capital expenditures as well as sales and marketing expenses, and will likely be accompanied by significant operating losses over the next five years or more..."

With minimal revenues coming in, the company's ambitious business plan will require a continued influx of capital, which the company intends to "raise through subsequent equity offerings, by increasing our debt, or a combination of the two." There's nothing obscure about Clearwire's intentions here -- investors will see a lot of red ink, for a long time, with an expected increase in either debt, share dilution, or both.

What management does:
Clearwire sold its NextNet equipment division to Motorola (NYSE: MOT) in August 2006, so the vast majority of revenue now comes from sales of broadband and voice services. Service revenue is rising rapidly as new markets for its broadband service are launched domestically and internationally. But the rapidly growing revenue stream over the past three years remains dwarfed by Clearwire's epic cash-burning.

	2004	2005	2006
Service Revenue (thousands)	$243	$8,451	$67,598
Net Loss (thousands)	$33,042	$139,950	$284,203
Subscribers (thousands)	3.5	62.3	206.2

One Fool says:
To compete against telecom giants such as AT&T (NYSE: T), Verizon (NYSE: VZ), and Sprint Nextel (NYSE: S), Clearwire needs to scale its network coverage by investing in spectrum licenses and installing equipment. As evidenced by its CAPS rating, though, only a small group of investors have the stomach to sit and watch cash fly out the window through this build-out period.

So why is Wall Street so hip on Clearwire? Let's call it the Craig McCaw factor. McCaw has a track record in both the cable business and cellular business of placing early bets in industries that pay off big down the line. Investors bullish on Clearwire are hanging all hope on a three-peat success from McCaw.

Call up more Foolishness:

• Clearwire Burns Cash, Churns Investors
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Fool contributor Dave Mock offers thoughts for pennies, but few take the offer. He owns shares of Motorola. Dave is the author of The Qualcomm Equation. The Fool has a disclosure policy.