09:56 AM
Eric Zeman
Eric Zeman

Clearwire Cost Reduction Measures Include Layoffs, Product Delays

Despite what it termed "strong demand" for its WiMax network, Clearwire plans to cut 15% of its workforce among other initiatives in order to reduce spending.

Clearwire's most recent quarterly report shows that it added 1.23 million new subscribers, with the total now exceeding 2.84 million. The company believes it will have 4 million customers by the end of 2010. Clearwire has aggressively built out its WiMax network, which it says now covers about 82 million Americans in launched markets and 100 million including markets not officially launched.

Revenue for the third quarter was $147 million, a 114% increase over third quarter 2009 revenue of $68.8 million. The company had a net loss of $139.4 million, and an EBITDA loss of $330.7 million.

However, the company needs more funding to continue operations. Its initial set of backers, which include Google, Intel, Time Warner, and others, haven't ponied up the cash Clearwire needs to keep building and running its WiMax network.

Clearwire CEO Bill Morrow said in the company's quarterly report, "While we continue to exceed our subscriber and operational goals, we have not yet secured future funding and prudence dictates that we take appropriate cash conservation steps to reduce costs. We continue to pursue all options for future funding including debt, equity or a potential sale of excess spectrum or other assets, and we remain cautiously optimistic that we will resolve our short-term funding needs in the near future. We continue to believe that our unmatched spectrum portfolio and our all-IP based network will keep us extremely well positioned in the dynamic and burgeoning market for mobile data."

What does that boil down to? First, a head-count reduction. Clearwire plans to layoff approximately 15% of its employees. It's going to delay the development and opening of retail stores, specifically in Denver and Miami. It's going to delay the introduction of Clear-branded smartphones. It's going to trim its contractor workforce. Last, it is going to halt work on new sites.

Clearwire explains, "The Company currently has thousands of sites in various stages of planning and construction beyond its current build plan, and it intends to suspend zoning and permitting in a portion of those sites until such time as additional funding becomes available. These contemplated initiatives are intended to result in potential cost savings of between $100 million to $200 million in 2010 and again in the first half of 2011."

But what about Sprint, which owns 54% of Clearwire and is helping it to build the WiMax network? When asked for comment, Sprint spokesperson Stephanie Vinge told InformationWeek, "Dan Hesse recently stated that Sprint has been in discussions with Clearwire regarding the financial status of its ongoing operations, as well as Sprint potentially providing new financing. We expect those discussions to continue as we review alternatives with Clearwire. There is no assurance that the discussions will result in any transaction with Clearwire. Sprint is providing no additional comments on this matter at this time."

Vinge did say that Sprint's WiMax plans remain unchanged.

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