Kirkland, Wash. based Clearwire Corporation (NASDAQ: CLWR) closed on a transaction in December which merged the Sprint/Nextel (NYSE: S) wireless Internet business with the WiMax business of CLWR.
In connection with the transaction, CLWR secured $3.2 billion from a group of investors linked to the development of the wireless broadband industry, including Comcast (NASDAQ: CMCSA), Google (NASDAQ: GOOG), Intel (NASDAQ: INTC) and Time Warner Cable (NYSE: TWX).
Clearwater is offering its broadband service under the label "Clear."
While operating in a competitive environment for WiMax (Worldwide Interoperability for Microwave Access), CWTR has an advantage over WiFi, which is limited to access in small areas, such as home or coffee shop. WiMax, on the other hand, offers access from a very broad area and while being mobile in a vehicle.
Though not as capitalized as competitors like Verizon (NYSE: VZ) or AT&T (NYSE: T), the company's relationship with its investors should give it access to capital when needed.
On Jan. 9, due to a significant drop in the market value of CLWR stock, Intel announced a writedown of its investment in CLWR of $950 million. Intel is only the first of the investment group to reflect this writedown in their guidance for the quarter.
Driven by accounting rules mandating that investments in stocks that decline significantly in value be written off, the other publicly traded companies with investments in CLWR will be required to follow suit.
In the face of these writedowns, investors have kept the price of CLWR depressed in spite of recent good news from the company. At around $4.60, the stock is trading near its 52-week low of $3.24, and well below its high of $7.20.
The company's balance sheet reflects its growth mode, with a long-term debt-to-equity ratio of 186 and a current ratio of 3.25.
With more than 400,000 subscribers, Clearwater is beginning to deliver on the expectation of growth in the wireless business.
Now operating in Baltimore, Md., and Portland, Ore., the company's Clear brand is gaining positive reviews from subscribers. The recent announcement of the extension of low-cost telephone and Internet access services in Portland should result in further expansion of the service to additional markets.
The writedown of their investment in CLWR has not lessened Intel's belief in the company and commitment to its future. As one Intel corporate officer noted in connection with the release of the guidance on investment impairment, "Intel believes in the business model of WiMax."
Investors in CLWR should be equally positive, as the expansion opportunities for WiMax are substantial, and CLWR is well-positioned to grow with the expansion.
Louis Navellier's PortfolioGrader Pro, which offers free ratings for nearly 5,000 Wall Street stocks, rates CLWR a B or Buy.
Jamie Dlugosch is a contributor to NavellierGrowth.com.
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