Tuesday, August 11, 2009

Clearwire's Loss Narrows, Shares Fall

. Tuesday, August 11, 2009

By stockOzone team

Wireless service provider Clearwire Corp (CLWR.O) posted a slightly narrower quarterly loss on Tuesday, but its revenue missed Wall Street estimates, sending its shares down almost 7 percent.

Analysts said subscriber growth was weaker than expected and that some investors had been hoping Clearwire, which is 51 percent owned by Sprint Nextel Corp (S.N), would announce new funding arrangements along with its results.

"The big question revolves around the potential market opportunity and business case for the service," said Soleil Nelson Alpha Research analyst Michael Nelson, who added that Clearwire's 12,000 customer additions were less than half the 25,000 net additions he had expected for the quarter.

The company, which is building a network based on a high-speed wireless technology known as WiMax, did not break out how many customers it had signed up to recently launched markets such as Atlanta and Las Vegas.

Clearwire was progressing in its search for $2 billion to $2.3 billion new financing it needs to fund its plan to expand its WiMax network to cover a population of 120 million people by the end of 2010, Chief Executive William Morrow said.

"We really want to have this buttoned down by the end of this year," Morrow told Reuters. He listed options such as vendor financing, raising new debt, a public equity offering and a strategic investment.

Morrow also said that the company would apply for funding from the U.S. government's broadband stimulus project, but noted that this money, if received, would have to be used for markets outside of its current expansion plan.

The company said its loss narrowed to $73.4 million, or 38 cents a share, from a loss of $74.6 million, or 40 cents per share, in the same quarter a year ago.

Excluding items, its loss would have been 35 cents per share, compared with analysts' average expectation for a loss of 39 cents per share, according to Reuters Estimates.

Revenue rose to $63.6 million from $58.6 million in the same quarter a year ago, but was below the average analyst expectation for $65.3 million, according to Reuters Estimates.

As it adds more new WiMax markets this year, Clearwire said it expects a stronger than usual cancellation rate from customers using its legacy service, which is based on an older wireless technology.

Morrow said the company may be able to break out subscriber numbers for WiMax service after the fourth quarter.

Investors would have liked more information on the new service, said Roe Equity Research analyst Kevin Roe, but he added that the company is early in its development plan.

"All we can do is look at how the network build-out is progressing and that is marching forward as planned," Roe said. "We really have to wait another quarter before drawing conclusions on the subscriber ramp of their new product."

Clearwire said it would expand its network to reach a potential 40 million people by the end of this year, including WiMax coverage for 30 million people in more than 25 markets.

Clearwire shares fell to $7.85 in late trade after closing at $8.43 in the regular Nasdaq session. The shares have almost doubled in value since early June.

Disclosure: Author does not own any of the stocks discussed here.

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