Clearwire IPO draws near

The long-awaited Clearwire IPO is around the corner, as the WiMAX pioneer finalizes its plans to offer up to 23 million shares at $23 to $27 each, bringing the company more than $600 million--about $100 million more than the company's initial expectations. The funds raised in the IPO will more than make up for the $300 million Clearwire spent in February, for an additional swath of WiMAX-suitable spectrum from AT&T. The IPO will also affect the company's equity distribution: Last year, Intel, Motorola and other shareholders had invested $1.1 billion in Clearwire. The IPO means that Intel and McCaw will control 77 percent of the company after the IPO, down from the current 84 percent.

Clearwire intends to make its money in mobile WiMAX. "The real opportunity will be with mobile WiMAX. DSL and cable will continue to dominate fixed broadband," says Dan Locke, an analyst with Pyramid Research. Making money in mobile WiMAX, however, will not be easy in the short run. Pyramid Research points out, for example, that Clearwire has not yet begun to build a mobile WiMAX network and that the rate of growth of its subscriber base may be relatively slow: Pyramid expects that only 5.1 million people will be using mobile WiMAX worldwide by 2010. Note that at the end of 2006, Clearwire had 206,200 fixed WiMAX customers and it expects to have as many as 400,000 subscribers worldwide by the end of this year. Moreover, in 2006, Clearwire had about $100 million in sales, but about one-third of its revenues came from network equipment, a business it sold to Motorola last summer. That means that future revenues for Clearwire will depend even more on money from WiMAX subscribers.

The company has deep pockets, but its losses--so far, and projected--are not trivial: Clearwire had $284 million in losses in 2006, and the company expects to burn through $800 million this year. The company anticipates remaining in the red for at least the next five years, and it has amassed $756 million in long-term debt.

For more on Clearwire's IPO strategy:
- see this Business Week report
- and The Wall Street Journal's comments