In a city that’s built itself on risky bets and high stakes, Clearwire will fit right in. Today, Clearwire officially launched its mobile WiMAX service in Las Vegas. The company’s fourth launch in 2009 will cover 1.7 million residents across 638 square miles in the wide, flat Las Vegas basin.
So far this year, Clearwire has launched in Portland, Ore., Baltimore and Atlanta. From Las Vegas, the company will move on to cities like Chicago, Honolulu and Philadelphia with the goal of covering 120 million people by the end of 2010.
Whether Clearwire will complete its herculean task of building a wireless business from scratch has been a heated topic. The company is armed with a huge chunk of spectrum, $3.2 billion in venture capital and big-name backers like Google and Intel. It also faces powerful rivals like Verizon, and it’s not clear how much a head-start advantage over LTE will benefit Clearwire in the long run.
As Morningstar analyst Michael Hodel puts it, “…given the strength of the firm’s rivals, we aren’t enthusiastic about the stock.”
Clearwire’s losses are expected to widen in the third quarter to about 40 cents per share on sales of $64.8 million, worsening last quarter’s loss of 38 cents per share on sales of $62.1 million.
When the company will make a profit is anybody’s guess, but it’s beginning to look like the company will soon need another infusion of cash. How it will go about getting that is unclear. It could turn to its investors for money, but given that it has already sunk a collective $3.2 billion into the effort, the current investors may be hesitant to pony up for more.
WiMAX is a technological standard that has become something of an underdog technology to LTE. This may result in the manufacture of fewer WiMAX-compatible devices, possibly hindering the buildout of Clearwire’s device ecosystem. In the future, it could also complicate roaming between Clearwire’s 4G WiMAX network and competing LTE networks, although the technologies are similar enough that dual-mode devices could be created.
Judging from some of Clearwire’s additional news, these challenges have not gone unnoticed by the company. The company seems to be addressing some key weaknesses in its business model, particularly in regards to coverage and its device ecosystem.
On Aug. 1, the company will release a dual-mode 3G/4G modem that will allow Clearwire customers to roam on Sprint’s nationwide 3G network. As Clearwire’s mobile WiMAX service is currently only available in three other markets, 3G roaming is an essential interim capability to tide over subscribers until Clearwire completes its nationwide buildout.
Clearwire is also extending an olive branch to Apple with software that will allow Mac users to use the mobile WiMAX service. The software, slated to be available Aug. 17, is compatible with existing Clear USB 4G WiMAX-only modems. Dual-mode 3G/4G modems will be available for Macs later this year.
In addition, the company is releasing the mobile WiMAX-enabled Samsung Mondi in August. The Mondi will be followed up by a WiMAX-embedded Toughbook computer by Panasonic, to be released by the end of this year.
It’s not clear when or if these changes will affect the company’s bottom line, however. The odds are stacked against them and the company will burn through between $1.5 billion and $1.9 billion just this year to build out the network.
To Clearwire’s credit, it has a huge lead in the mobile broadband space. It is well-positioned to be a major player in data, the industry’s highest growth segment. Also, the cable partners are starting to resell Clearwire’s mobile WiMAX under their own brands to fend off competing wireline, wireless, Internet and television bundles from AT&T and Verizon.
Comcast was the first Clearwire investor to do so, and began reselling Clearwire’s mobile WiMAX service in Portland under the brand High-Speed 2go on June 30. By year end, the service will be available under the High-Speed 2go moniker in Atlanta, Philadelphia and Chicago.
If Clearwire’s foray into this desert gambling oasis pays off, what happens in Vegas won’t stay in Vegas. Instead, it could happen elsewhere as the company moves forward with its daring plan to take the lead on mobile broadband.