Thursday, January 8, 2009

Another bad week for WiMax

Lots of WiMax news today:

When ClearWire was preparing its IPO near two years ago I concluded:
As with other such businesses, I can see three outcomes:
  1. Clearwire gets enough money from the IPO to grow big;
  2. Clearwire does well enough to get gobbled up by one of the big boys (a successful strategy recommended by my old mentor Charlie Jackson); or
  3. Clearwire runs out of money and dies.
I think we can rule out option #2 — Sprint got out of the WiMax business by handing it to Clearwire, and it’s got big enough problems of its own that it can’t bail anyone else out. The other US carriers aren’t interested in WiMax because they’re all going with LTE. Foreign carriers are even less interested in WiMax.

With two of its key strategic investors pulling back, a few analysts speculate Google that will add to its existing $500 million investment in Clearwire (but no one is predicting a complete bailout). I can’t see why Google would want to do this.

The chances of #1 don’t look very good either. As of its Sept. 30 balance sheet, ClearWire has less than $400m in liquid assets on its books. Verizon Wireless is on track for capital spending of about $10 billion just in 2008 — and (for those of you who don’t watch American TV) it already has a large nationwide network.

So absent a tremendous positive cashflow from its existing (or near-term) markets — or a new round of debt or equity — I don’t see how ClearWire is going to build a nationwide footprint. And if there are doubts about the prospects of a nationwide network, business travelers aren’t going to sign up for the existing and forthcoming cities.

Eight months ago, I said: “WiMax as technology is done, finish, finito — stick a fork in it.” After this week, it seems as though Nokia and maybe even Intel agree.

In those eight months, the availability of capital and the willingness of consumers and businesses to spend money on technology has dropped dramatically. So I’m even more pessimistic about WiMax than I was before.

Update Friday 7pm: Clearwire contacted me to point out that it received a $3+ billion investment in December, which I discuss in my Friday posting.

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