Clearwire Takes a Well-Deserved Beating: What You Need to Know


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Clearwire (NAS: CLWR) took a beating -- down 28.8% at the close -- after announcing plans to raise $900 million in additional funding to build out a network that may fail to compete successfully against well-heeled alternatives.

So what: The news came during Clearwire's second-quarter earnings report, which was ugly. Get the financial details here. What's important is the plan. Management wants to build an LTE network while it completes the WiMAX network it's been working on for years.

Now what:I was wrong. Technology isn't the problem; debt is. Clearwire ended the quarter with the same $4 billion in debt it started the year with, all while bleeding more than $567 million in cash from operations. To be fair, the balance sheet also shows wireless spectrum licenses worth $4.3 billion. Carriers mat very well bid for a slice of that air, but Clearwire's troubling financials don't leave a lot of room for negotiation, especially now that economic worries are roiling the debt and equity markets. A deal similar to the one Liberty Media extracted from Sirius XM Radio (NAS: SIRI) two years ago may be the best current investors can hope for. Do you agree? Disagree? Weigh in using the comments box below.

Interested in more info on Clearwire?Add it to your watchlist.

At the time thisarticle was published Fool contributorTim Beyersis a member of theMotley Fool Rule Breakersstock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim'sportfolio holdingsandFoolish writings, or connect with him onGoogle+or Twitter, where he goes by@milehighfool. You can also get his insightsdelivered directly to your RSS reader.Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.