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| "<!-- [DocumentBodyStart:dd3b99e5-c157-40b9-a7ce-c57c6224ac57] --><div class=\"jive-rendered-content\"><p class=\"MsoNormal\">In what cannot be seen as a positive development, <a class=\"jive-link-external-small\" href=\"http://online.wsj.com/article/SB10001424052748704353504575596382919985208.html\" target=\"_blank\">Clearwire sent a “going concern” disclosure to the SEC</a> on Thursday and announced it is laying off 15% of its workforce. Further they have suspended their 4G WiMAX service launches in Denver and Miami and delayed the introduction of their own branded smartphone. According to Clearwire’s CFO, Eric Prusch, the combined moves are expected to save $100 to $200 million this year, and the company has enough cash on hand to last through the middle of next year.</p><p class=\"MsoNormal\" style=\"min-height: 8pt; height: 8pt; padding: 0px;\"> </p><p class=\"MsoNormal\">This is the second round of bad news for the beleaguered WiMAX provider. Last month <a class=\"jive-link-external-small\" href=\"http://blogs.forbes.com/elizabethwoyke/2010/10/13/analysts-divided-over-clearwire-spectrum-sale/\" target=\"_blank\">Clearwire announced that they were considering selling as much as 40 MHz of their spectrum holdings</a> in a bid to raise additional cash to continue their network build out. Clearwire had formerly disclosed that they held as much as 120 MHz in many markets, so a 40 MHz sell off would represent a third of their spectrum holdings.</p><p class=\"MsoNormal\" style=\"min-height: 8pt; height: 8pt; padding: 0px;\"> </p><p class=\"MsoNormal\">Clearwire’s difficulties demonstrate how difficult it is to launch a new mobile network (at least in a country as big as the US), and it does not present a rosy outlook for competitive mobile data services. Founded by mobile pioneer Craig McCaw in 2003, Clearwire merged with Sprint’s WiMAX operation in 2008, and Sprint now owns 54% of the company.</p><p class=\"MsoNormal\" style=\"min-height: 8pt; height: 8pt; padding: 0px;\"> </p><p class=\"MsoNormal\">For those of us who pine for more competition in the mobile services space, Clearwire was our quixotic hope. The key asset they held was that wide swath of spectrum in the Broadband Radio Service (BRS) band around 2.5 GHz to 2.7 GHz. The other major holder of that BRS spectrum was Sprint, though the entire band is shared with Educational Broadband Service. Clearwire began with a plan to sell fixed location wireless Internet access in that spectrum using equipment from NextNet Wireless; NextNet was acquired by Motorola in 2006 as part of an investment in Clearwire.</p><p class=\"MsoNormal\" style=\"min-height: 8pt; height: 8pt; padding: 0px;\"> </p><p class=\"MsoNormal\">To move into the mobile wireless market, Clearwire bet on the dark horse in the 4G race, WiMAX. Sprint had made a similar bet and after an on-again-off-again relationship, the two companies merged in 2008. At the time the decision was made, the LTE standards were nowhere near ready, so WiMAX led the not very long list of available options.</p><p class=\"MsoNormal\" style=\"min-height: 8pt; height: 8pt; padding: 0px;\"> </p><p class=\"MsoNormal\">However, there’s more to success in mobile services than being first to market. As the mobile market has grown up, the emphasis has shifted from “speeds and feeds” to “devices and experiences”. WiMAX launched in the period when “smartphone” meant “BlackBerry”, and “mobile application” meant “email (without attachments”.</p><p class=\"MsoNormal\" style=\"min-height: 8pt; height: 8pt; padding: 0px;\"> </p><p class=\"MsoNormal\">Had the wireless data market remained a matter of providing remote access for laptops, WiMAX had as better a chance at success than LTE given that the performance was roughly equivalent and a dongle is a dongle. That all changed with the iPhone and the Android, and now it’s all about devices an apps. Sprint is offering two WiMAX-compatible Android-based smartphones, the Evo from HTC and the Epic from Samsung. That gives them two more than what we have for LTE, but the market seems to have recognized that situation will reverse abruptly once LTE services start to roll out.</p><p class=\"MsoNormal\" style=\"min-height: 8pt; height: 8pt; padding: 0px;\"> </p><p class=\"MsoNormal\">The big question now becomes: how will the Clearwire story play out? Clearly more capital is needed, and the best prospects for that seem to be Sprint or T-Mobile. Of course Sprint is now trading below $5 where they had been around $15 in 2008. Maybe some private equity group will grab them in the hopes of selling off the spectrum holdings or developing another plan that doesn’t involve going head-to-head with LTE-based smartphones.</p><p>We’re still hoping for more competition in the mobile data space, but it is becoming increasingly doubtful that Clearwire or WiMAX will be part of that picture.</p></div><!-- [DocumentBodyEnd:dd3b99e5-c157-40b9-a7ce-c57c6224ac57] -->" |
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