Device and chip-makers as well as net-based software and content providers are drooling if not frothing at the mouth not only for seamless mobile internet connectivity at broadband speeds, but connectivity at commodified prices. In order to get seamless connectivity at commodified prices they need new competitors and probably the easiest way to do that is by aiding WIMAX. Other technologies don't yet have the data transfer speeds at comparable costs.
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Despite this, few are willing to place their money where their hopes lie. Some (like Google or Apple) would rather not support WIMAX because by doing this they would be declaring war on the mobile operators that they still need to play nice with to get into the mobile market.
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Nevertheless, Clearwire can help to make seamless mobile internet connectivity at broadband speeds happen because of Intel and Motorola. They backed Clearwire and will probably be the investors of last resort. Because of this, other device and chip-makers are building gadgets to run on WIMAX.
Sprint has also been investing in WIMAX infrastructure but it is going through troubles in its core business and the resignation of their CEO makes it seem like they may be pulling back on WIMAX. I don't think this will be the case, but whether Sprint keeps Xohm (their future WIMAX offering) or spins it off or sells it, Xohm needs Clearwire. This is because investors don’t have the stomach to spend billions to build out a country-wide WIMAX network on their own as well as one that will have to compete with another WIMAX network.
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Soon enough, some mobile operators and/or fixed broadband providers will partner or bid to be able to combine WIMAX with their offerings.
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Still, there are big risks. At a time when investors seem to be questioning whether Clearwire will survive, the company along with Intel and Motorola must keep investors confident enough to keep financing its WIMAX rollout.
If Clearwire succeeds, eventually competition from other technologies combined with interoperability of devices will hurt its margins, but that won’t happen until Clearwire’s shares have traded much higher than they are currently.
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If Clearwire fails I think the downside is very limited. I would give a worst case scenario of a 50% loss from these levels but it’s much more likely that the floor has been reached.
$20.83 (10/05/07)
