It only seems fitting in a Google week for me that it end with the search giant’s announcement that it will sell its interest in troubled wireless data network provider Clearwire Corp. In a regulatory filing, Google said that, starting on Monday, February 27, it will be selling its stock in Cleawire for $1.60 per share, or $47 million total. For those keeping track, this is a 94 percent loss on Google’s original $500 million investment that was made in 2008.
Google has been the third largest stake holder in Clearwire. Sprint, which is having troubles of its own in the hotly competitive U.S. cellular market, is the majority shareholder but does not have voting control. Cable giants Comcast and Time Warner Cable, who, along with Sprint, were looking at wireless data as “the next big thing” when they made their investment in Clearwire, are other big shareholders. Their original investments were $1.05 billion and $650 million respectively and chip manufacture Intel invested $1 billion. Bright House Networks is also a significant investor.
So what is this all about?
Good question. Interestingly, Clearwire states the reasons itself if you look back to their quarterly earnings report of February 15, 2012. First there was the good news:
But, look at the “Forward-Looking Statements.” Below are the most salient bullets in a long list as it pertains to Google deciding to bail out now:
While Google did not say why it is selling now after having written down the value of its Clearwire investment in both 2009 and 2011, the list above is explanation enough. The U.S. has not been and should have been expected to be a great market for WiMax except possibly in rural areas. 4G LTE has become the de facto implementation of choice for wireless broadband along with WiFI, and it is the perfect service for Apple iOS, Android and Windows devices. The “iconic” introduction of 4G iPads in March and the coming of iPhone5 which will be 4G LTE as well, and the fact that all current smartphones support WiFi means that Clearwire has a lot of catching up to do while strapped for money and time.
As the soon-to-be proud owner of Motorola, Google sees its future based on an ecosystem that is app and device driven where the network is a so called “dumb pipe,” except that it had best be smart enough to be LTE and WiFi friendly. Smart companies do not chase dumb pipes when it appears there is no chance for them to become smarter.
As of this moment (around 1:30 PM Eastern Time), Clearwire (NASDAQ: CLWR) is off 5.52 percent at $2.14 dollars per share. Google is up to $610.70, up .76 percent for the day. The tale of the tape tells it all. Only time will tell how long the other big investors are willing to ride this horse. And, while the stock market is not reflecting it at the moment, the crippling of Clearwire’s prospects along with the growing troubles with LightSquared, which missed a payment to Insmarsat this week, is likely good news for Verizon and AT&T even if it does not solve their spectrum and current business model issues.
You have to love the wireless industry both the U.S. and globally. There is never a dull moment as the industry’s annual gathering in Barcelona this coming week is sure to prove.
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