Will CEO Change At Sprint (S) Ruin Clearwire (CLWR)?

Print Email

Clearwire (CLWR), the WiMax IPO run by telecom legend Craig McCaw, has been up and down over the last six months. It hit $33 in July, but now trades closer to $20.

Clearwire faces a tremendous headache if the person picked to replace Sprint’s (S) current CEO, Gary Forsee, does not support the telecommunication company’s $5 billion WiMax build-out. By 2010, Sprint plans to reach over 120 million people in the US with the next-generation wireless broadband tech. It will compete with the 3G systems used by its competitors AT&T (T) and Verizon Wireless.

One of the reasons that Clearwire shares have been depressed is the concern that the company will have to take on billions of dollars in debt to complete its own national WiMax network. But, a month ago, Sprint and Clearwire agreed to a partnership where customers of each company could use the network of the other. In theory, it should save substantial capex for both firms.

If Sprint backs off of WiMax and decides to use a more tradition technology, Clearwire loses the ability to share a big network, and its cost to do business could sky-rocket.

There are other potential losers if Sprint changes course. Intel (INTC) has put a lot of money into WiMax. It plans to supply WiMax-enabled chips for PCs and handheld devices. INTC also put several hundred million dollars into Clearwire. Another earlier investor in McCaw’s company was Motorola (MOT). It is hoping to sell handsets and infrastructure to make the national WiMax system work.

If Sprint’s WiMax plans blow-up, there will be a lot of wounded.

Douglas A. McIntyre