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Did Clearwire Really Deserve To Go Public?

Serial telecom entrepreneur Craig McCaw today helped take his latest venture, wireless broadband service provider Clearwire, public. Clearwire raised $600 million in the initial public offering, selling 24 million shares at $25 a share going into the start of public trading only to close down 1.5 percent at $24.62 a share. Should Clearwire have gone public?

Obviously we'll have a much better answer to this question in a few months once the market has time to evaluate this company. But for now, it seems like Clearwire went public more on its backer's reputation than on its own merit.

I was in Washington, DC, at the WCA wireless broadband show a few years ago when Craig McCaw launched Clearwire. A huge throng of wireless industry insiders and reporters were on hand for a show that didn't normally get that much attention. The thing I remember most from that day was something McCaw said during his keynote. He told the audience that despite millions of dollars in research and marketing the wireless broadband industry -- i.e. wireless broadband services delivered over non-cellular technologies -- had yet to achieve any real success in the marketplace. Obviously, McCaw hoped to change that with his new venture.

Here we are three years later and the first signs for Clearwire in the public market don't look that great. Clearwire's IPO today bucked recent trends, where most public offerings have closed around 5 percent higher than their openings on the first day of trading.

Right now that doesn't matter. Clearwire got it's cash and now it can pay for the spectrum it recently acquired from AT&T, as well as expand its network.

Om Malik questions Clearwire's IPO, arguing that this looks very similar to public offerings from the telecom bubble in the 1990s:

Today should be a red-letter day for all tech-IPO aspirants, for today Wall Street proved that a loss making company can go public, raise over half-a-billion dollars in public market funds, and then get a market capitalization of over $4 billion.

No, this is not an old post being reposted, but instead it is about Clearwire’s (CLWR) initial public offering that added another $1.4 billion to telecom billionaire Craig McCaw’s already bulging pockets. Merrill Lynch, JP Morgan and Morgan Stanley underwrote Clearwire’s offering.

Malik goes on:

As an ongoing concern, it is going to be a while before its more sensible investors can exhale, and that is why I think Kirkland, Washington-based company’s public market debut is quite a staggering feat: the company lost $284 million on revenues of $100 million in 2006. And that its current customer base is about 205,000 strong: 184,400 U.S. subscribers and 21,800 international subscribers.

$600 million for a company with only 205,000 subscribers and $284 million in losses? If that doesn't give you 1990s nostalgia, I don't know what will. With numbers like these it's tempting to think that McCaw and his Clearwire team hope its now paid-for spectrum will allow them to sell off and get out before the market brings down the hammer.

The problem with this strategy is that Clearwire's technology, WiMax, is still a largely unproven. There is only one major U.S. service provider, Sprint, committed to it right now and Clearwire's sub numbers don't look all that promising.

Malik isn't the only blogger out there with some skepticism about this IPO. Bill Koss over at SeekingAlpha wrote this blistering analysis a few weeks ago. In it, he blames public stock figures like Jim Cramer for overhyping the company and its chances.

And let us not forget, Clearwire first tried to go public in June 2006. The service provider stopped its IPO plans then after Intel and others kicked down an additional $900 million in funding.

Will McCaw's comments at that WCA show come back to haunt Clearwire? Or will he find his old magic and make Clearwire a big success? A lot is riding on this company, including the possible future of WiMax as a technology. What do you think will happen to Clearwire?

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