Sprint/Nextel (NYSE: S) and Clearwire (NASDAQ: CLWR) announced that they're ending their agreement to create a nationwide, high-speed WiMAX network, citing the complexity it would have added to their businesses. Sprint said in a separate statement that it would review its WiMAX business plan and outlook in light of the announcement and plans to make further comments on the topic early next year.
Clearly, Sprint/Nextel has all kinds of internal problems, and trying to build out a project of such magnitude was beyond the realm. It came to its senses, and I would expect management to concentrate on shoring up their core businesses.
For Clearwire, this is clearly bad news. I would now expect all the WiMAX opponents to jump up and down and declare the end of the technology. Remember when Qualcomm (NASDAQ: QCOM) CEO Dr. Paul Jacobs announced two years ago, that "WiMAX is dead." Was he right? Well, two big players are still investing heavily in the technology. Both Intel (NASDAQ: INTC) and Nokia (NYSE: NOK) are spending heavily in their WiMAX development.
What's the future of WiMAX? Who knows. When it comes to technological innovation and implementation you need to be a prophet to know what will happen. I would hazard a guess that at the very least, we will see it implemented in emerging markets and the third world. This may play right into the hands of the Israeli-based Alvarion (NASDAQ: ALVR). It do most of its business in emerging markets, and has produced strong earnings over the last few quarters. It continues to sign new deals. If you want to make a safe bet on the future of WiMAX, think Alvarion.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. Writer is long ALVR. Author holds no position in any other stock mentioned as of 11/9/07.
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Reader Comments (Page 1 of 1)
11-10-2007 @ 9:24AM
Don said...
WiMax has low capex vs potential revenue. This will continue to push it onto the main stage in the U.S. If you want a good idea of how hot the demand is, check the interest in the upcoming FCC spectrum auction. Note also how the high capex and poor coverage of WiFi has put the brakes on several big municipal wireless broadband projects. Nor will Clearwire fold up its tent. Expect this lead WiMax sled dog to be back in the traces with new money in the near future.