NextWave spending heavily

NextWave Wireless is burning through some serious cash as it embarks on its Wireless 2.0 vision. The company lost more than $59.5 million during the second quarter, primarily attributed to its increase in operating expenses related to the expansion of its R&D teams and related support organizations. In the first six months of the year, NextWave lost more than $114.7 million, a significant increase from the $38.1 million it lost in the first six months of 2006.

NextWave's stock fell 7.86 percent to close at $6.21 yesterday.

The company had a busy quarter as it works to fulfill its stated mission of making spectrum available to companies that want to enter the mobile broadband space and use its products and technologies, including WiMAX and TD-CDMA. It acquired IPWireless, the maker of TD-CDMA, for $99.6 million and purchased a 65-percent controlling stake in WiMAX Telecom AG through its Inquam Broadband GmbH subsidiary.

It also announced the fabrication of its first-generation WiMAX chipset. NextWave wants to become a powerful contender in the WiMAX chip market, and plans to increase its workforce in the chipset division from about 250 today to some 350 people next year.

This quarter, NextWave acquired a 69.23 percent stake in Japan's IPMobile from Mori Trust and is rushing to deploy TD-CDMA equipment before the operator's network license expires in November.

Indeed, NextWave has quite an impressive collection of assets: a rather large swathe of spectrum the 2.3 GHz, 2.5 GHz and Advanced Wireless System bands (1710-1755 MHz and 2110-2155 MHz), beamforming intellectual property from its acquisition of WiFi vendor Go Networks and mobile video from its ownership of PacketVideo, to name a few. Then it is spending heavily in both WiMAX and TD-CDMA, both of which haven't reached any significant economies of scale.

In short, the company's strategy is still perplexing because of all of the seemingly disparate assets and no announced customers. Given that, it's difficult for investors to stomach the heavy spending that will likely continue throughout the year. --Lynnette