IDG News Service - Financial charges taken by both Intel Corp. and Time Warner Cable Inc. on Wednesday put the spotlight on the tough prospects for Clearwire Corp., the company that plans to build a national mobile broadband network using WiMax technology.
Intel, the biggest backer of the fledgling technology, said it will take a non-cash charge of $950 million to its fourth-quarter earnings, which are due to be announced on Jan. 15. The announcement came as part of a warning that Intel will miss its revenue forecast for the quarter, which had already been adjusted downwards once before.
Also on Wednesday, Time Warner Cable said it expects to incur a charge of $350 million from its Clearwire investment on its fourth-quarter results. Time Warner was one of three cable companies that joined with Google Inc. to invest a total of $3.2 billion in Clearwire last May. Cable giant Comcast Corp., which also participated in that deal, plans to take a charge of its own, according to reports published Wednesday.
Clearwire absorbed Sprint Nextel Corp.'s WiMax network business as part of the May agreement, which closed late last year. As the deal was concluded, Clearwire said it had received the $3.2 billion investment. The cable operators plan to resell Clearwire service as a mobile complement to their wired offerings.
But the meltdown in financial and credit markets last year added yet another weight to an already heavy burden for Clearwire.
The company, which began as a wireless broadband service provider using pre-WiMax equipment, is attempting to build a network that would compete against both AT&T Inc. and Verizon Communications Inc. in both the home broadband and mobile data arenas. Between Sprint's earlier buildout and Clearwire's own mobile WiMax system, which formally launched Tuesday in Portland, Ore., there are just two cities served by the technology today. The funding the company has received to date is not expected to be enough to pay for the entire national buildout.
Numerous delays surely haven't helped Clearwire's stock, which has plummeted from more than $16 per share in February 2008 to a close of $4.98 on Wednesday. The falling price of the shares has impaired the value of its partners' investments.
Intel and the cable partners, which also include Bright House Networks LLC, are likely to stand behind Clearwire for at least the next year or so, despite any financial pain they may suffer, industry analysts said. Intel, for one, is pushing hard to get WiMax integrated into laptops alongside Wi-Fi. But between fast wired broadband and 3G, plus the emerging LTE (Long-Term Evolution) fast mobile standard, Clearwire faces plenty of challenges.
"This isn't the kind of moneymaker that I think many of these vendors envisioned," Gartner Inc. analyst Ken Dulaney said. "They're going to do what they can to try to make this go, [but] to make money, you've got to sell to millions of users."
WiMax would be ideal for residents in underserved rural areas, but there isn't enough population density there to support it, Dulaney said. On the other hand, for Intel, a bet on WiMax could still pay off in other parts of the world, he added.
Painful adjustments like those announced Wednesday can also help the situation, Dulaney said, recalling the Iridium satellite mobile service of the late 1990s.
"Iridium made sense when it got written down," Dulaney said. "At some point, Iridium was just way overpriced."
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