Editor's Corner




Investors in Clearwire's high-flying $600-million IPO last Thursday had some buyer's remorse last week. The stock tanked 11 percent during its first week of public trading as droves of investors sold off shares before the weekend. Apparently the Midas touch factor of famed cellular mogul Craig McCaw wore off a bit.

Clear wire presents a bit of a mixed bag for investors. On the one hand, the stand-alone wireless broadband company represents great risks--risks the company has been quite upfront about. Since its inception four years ago, Clear wire has lost more than $460 million while only generating $100 million in annual sales to some 206,000 customers, most of which are overseas.

But the prevailing notion is that WiMAX will provide that catalyst for a pure-Internet business model. If you can build a business model that opens the Web, you tap the future of the Internet because of WiMAX's superior uplink performance.

Getting there is another matter. WiMAX, as much as folks want to mature this technology before it even gets out of the gate, still has some unknown costs when it comes to both capex and opex. Likely hardware vendors won't be able to move the economies of scale down as fast as they say they can and the technology won't be as cheap as many advocates have touted. You just can't force the maturity cycle to move at an artificially fast rate. Have you ever known any new wireless technology to meet expectations?

The upside of this stock, however, might be the fact that Clear wire, with its nice collection of 2.5 GHz licenses, could be a prime takeover target. There are plenty of highly leveraged companies that want a piece of the WiMAX market and don't have any spectrum. News Corp. and its majority-owned DirecTV business were reportedly embarking on a plan in July to set up a nationwide WiMAX network that would provide a valuable interactive broadband loop used to sell content, goods, advertising and services directly to consumers. Talk about a significantly better business case for Clear wire, which is positioning itself as another broadband service provider.

Certainly McCaw is no stranger to these types of initiatives. The renown investor made his fortune by creating the first major wireless operator, McCaw Cellular, and later selling the business to AT&T in 1994 for $11.5 billion. He also is behind some failed initiatives, like his satellite initiative Teledesic and local-phone carrier XO Communications. Investors just have to figure out which one Clear wire is going to be. -Lynnette

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