Foolish Forecast: Clearwire's Unclear Future

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Wireless broadband services provider Clearwire (Nasdaq: CLWR) will deliver its fourth-quarter earnings later this month. Let's take a peek behind the curtain and see what's in store.

What analysts say:

• Buy, sell, or waffle? Fifteen Wall Street analysts register an opinion on Clearwire, with eight recommending a buy, while seven say hold. In our Motley Fool CAPS database, 277 investors have rated the stock, which has earned a two-star rating.
• Revenue. On average, analysts see revenue of $46 million.
• Earnings. Analysts expect the red ink to keep flowing to the tune of a $1.00 per-share loss.

What management says:
Clearwire updated the analysts at the end of January. Even with the background of questions about a possible reunion with Sprint Nextel (NYSE: S), management remained upbeat and said it continues to make progress in developing a roaming agreement between the two. Though analysts were hoping to hear that a resource-sharing agreement was rekindled, CEO Ben Wolff instead noted that the two companies "have aligned on a common network architecture with common features, functionality and performance expectations."

Management also reported that it expects to achieve $45 million in service revenue and 394,000 subscribers in the fourth quarter.

What management does:
Progress in Clearwire's initial WiMAX markets looks good, but there's not an extensive operating history at this point.

	2005	2006	1Q 2007	2Q2007	3Q2007
Service Revenue (thousands)	$8,451	$67,598	$29,275	$35,484	$41,297
Net Loss (millions)	$140	$284	$93	$118	$329
Subscribers (thousands)	62.3	206.2	258.0	299.0	348.0

Source: Capital IQ

One Fool says:
Assuming Clearwire makes great strides in spreading WiMAX nationwide, new risks will certainly pop up for investors. For one, Clearwire noted that there is a strong competitive response from cable and telecom operators. And Clearwire also has a revenue-sharing agreement with Intel (Nasdaq: INTC) -- much the same way that Apple (Nasdaq: AAPL) gets a cut of AT&T's (NYSE: T) revenue for iPhone usage -- that kicks in once laptops with Intel's WiMAX chips start showing up on the network. Both issues will cut into margins and should be watched.

On a positive note, Clearwire management shrewdly noted that it will tap the brakes a little and moderate the development of new markets in light of tighter capital markets. But dramatic changes in the forward business plan could happen in short order if a new deal with Sprint Nextel or funding from rumored sources such as Google (Nasdaq: GOOG) or Best Buy (Nasdaq: BBY) materializes. Either way, Clearwire is on the same path -- the amount of time to get there is the open question.

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