Clearwire Equity Tanks on Sprint News

By Gary Kim October 11, 2011

Clearwire’s stock fell 32 percent to $1.39 Oct. 7, 2011 following an announcement by Sprint that it was launching its own LTE network, on its own spectrum, without the help of Clearwire. Sprint furthermore said it will not sell any more WiMAX devices past 2012.

That’s a problem for a company that had counted on Sprint as its largest wholesale customer.

Sprint shares also fell about 10 percent to close at $2.71, though shares had been down to $2.48 intraday. Some investors might have been spooked by borrowing Sprint might have to do, or the refusal to provide guidance relating to the next several quarters. Clearwire stock falls 32 percent

But investors might also have been digesting the earlier news that Sprint has committed to buy at least 30.5 million iPhones, even though it would likely lose money on the deal until 2014, according to the Wall Street Journal.

The deal could represent a commitment of $20 billion at current rates, and Sprint has to buy the devices, whether or not it can sell them. Apple "Owns" Sprint

Apple was paid $632, on average, for each iPhone sold to mobile service providers in its most recent quarter, according to Credit Suisse.

 

The rapid LTE build, plus the Apple commitments, mean Sprint might have a tough time showing profit until 2014, even if sells all those 30.5 million iPhones.
Gary Kim is a contributing editor for TechZone360. To read more of Gary’s articles, please visit his columnist page.

Edited by Rich Steeves

Contributing Editor

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