Clearwire
(CLWR)
will be reporting its first quarter after the close Monday night with a conference call scheduled for 5:00 p.m. EDT. Current consensus is for revenue to be $48 million (up 66% year over year and 7% quarter over quarter) and a loss of 95 cents per share.
In the prior quarter, revenue was $45 million (up 91% year over year and 10% quarter over quarter) and the loss per share was $1.19. The company remains a net user of cash ($124 million in fourth quarter) and will remain so for the foreseeable future.
Due to the nature of Clearwire's business (i.e., early stage communications provider), there are a number of relevant metrics that I watch to ascertain how well or poorly the company is executing on its plan. These metrics are outlined in the table at the end of this article on a corporate basis as well as for the company's initial 25 markets. (The monitoring of those initial markets foreshadows what Clearwire is capable of doing overtime as its model expands its footprint.)
Given the uncertainties of the economy exiting the December quarter, Clearwire reduced its aggressive growth plans to improve its cash flow and financial performance. In light of the announced merger with Sprint Nextel's
(S)
WiMAX assets on May 6, however, as well as additional major cash investments by several strategic partners, the network ramp plans are likely to change again.
I'm certain that most interested parties on the upcoming conference call will want to talk about the deal, but we cannot ignore the aforementioned execution metrics as they are the best barometer in judging how well management transforms plans into reality.
The stock has suffered some huge swings in recent days, running up as much as 20% in advance of the deal announcement only to close down slightly that very day. Then it was hit with a 9% decline on a downgrade the following day. Just exactly how you downgrade a stock on a valuation based upon the discounted cash flow (DCF) through 2016 for a service that doesn't exist yet and has no pricing is beyond me. I have often wondered just how accurate the DCF models were in the earliest days of the cable and/or cellular industries decades ago.
Despite my cynicism, it does suggest to me that this name is going to be very volatile for sometime to come and a favorite for the players from the dark side.
Clearwire Metrics
Total Company
Original 25 Markets
Mar-07
Jun-07
Sep-07
Dec-07
Mar-07
Jun-07
Sep-07
Dec-07
Revenue (mils)
$29.3
$35.5
$41.3
$45.4
$18.1
$21.2
$22.7
$23.7
YY Chg
208%
131%
118%
91%
161%
108%
75%
52%
Subscribers (000s)
258
299
348
394
175
192
206
215
YY Chg
161%
130%
115%
91%
106%
78%
59%
42%
Net Adds (000s)
52
41
49
47
175
17
14
9
YY Chg
41%
32%
49%
7%
n/a
-26%
-36%
-57%
Avg. Rev/User
$35.80
$37.93
$37.41
$36.09
$36.20
$37.99
$37.64
$37.04
YY Chg
11%
10%
6%
-3%
11%
9%
5%
1%
Churn
1.6%
2.0%
2.3%
2.4%
1.7%
1.8%
2.2%
2.3%
Prior year
1.4%
1.6%
2.4%
2.0%
1.4%
1.7%
2.1%
1.9%
Cost/Gross Add
$343
$471
$462
$477
$318
$400
$391
$428
YY Chg
-5%
7%
9%
-7%
-13%
-8%
-6%
-1%
Covered POPs (mils)
10.1
11.6
14.8
16.3
4.2
4.2
4.3
4.4
YY Chg
74%
100%
124%
70%
8%
8%
8%
7%
Gross Margin
43%
34%
29%
16%
72%
76%
74%
76%
Prior year
39%
21%
31%
31%
48%
66%
65%
65%
EBITDA Margin
-3%
5%
10%
11%
Source: Company reports
Clearwire is one of the many technology and telecommunications stocks that Bob Faulkner monitors and discusses in The Telecom Connection.
At the time of publication, Faulkner had no positions in the stocks mentioned, but The Telecom Connection Model Portfolio was long Clearwire.Bob Faulkner has been in the investment business for 18 years with an exclusive focus on technology stocks. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Faulkner appreciates your feedback; click here to send him an email.Interested in more writings by Bob Faulkner? Check out his newsletter, TheStreet.com The Telecom Connection. For more information, click here.
