Beceem's IPO Plans: Positive for Clearwire

On Friday after the close of market, Beceem filed its S-1, paving the way for its IPO in the coming months. The investors are mostly venture capitalists and some management participation, with Intel(INTC) being the strategic investor at 20.3% (page 102 of the prospectus). In brief, Beceem is the leading play on WiMax chips, with WiMax being a broadband wireless technology deployed in over 530 networks world-wide to date.

Why is the Beceem IPO significant, and for whom? The Beceem S-1 filing comes almost to the day three years after the only other WiMax-related IPO, Clearwire(CLWR). Clearwire is the dominant WiMax carrier in the U.S., with service launched in 28 markets to date, such as Chicago, Seattle, Philadelphia, Atlanta, Dallas, Houston and Las Vegas. These 28 markets cover over 33 million homes, which will more than triple to over 100 million homes by December 2010, including cities such as New York, San Francisco, Los Angles and Miami. These launches have all been disclosed in Clearwire press releases.

Here is the correlation: Every single subscriber device ("modem" for short) which Clearwire has been selling to date is based on a Beceem chip. This could be simple USB modem or a sophisticated WiMax-to-WiFi battery-driven and pocketable converter such as the Sierra Wireless Overdrive. Of course, there are some Clearwire users who don't buy a modem from Clearwire because their laptops already come with a built-in WiMax modem, and those are made by Intel.

What is the correlation "from the other side" - Beceem's revenue going into the Clearwire network? First of all, Beceem sells to equipment makers such as Motorola (MOT) and a variety of mostly Asian OEMs/ODMs, who in turn sell to Clearwire. Here is the critical sentence in the Beceem S-1 filing, from page 38: "As of December 31, 2009, over 50% of our total revenue was derived from end customers based in the United States."

Well, "over 50%" is how much precisely? Somewhere between 51% and 100%. And what part of this goes to Clearwire versus other WiMax operators in the US? I don't think anyone would disagree about the notion that Clearwire constitutes probably 99% of all WiMax investment in the US at this point. My estimate is that approximately 75% of Beceem's revenue is for deployment in the Clearwire network, splitting the difference between 51% and 100%.