Clearwire Sends Distress Signal

Updated Clearwire distress story with shares now trading down 8%.

NEW YORK (TheStreet) -- In an ominous sign for cash-strapped tech shops, Clearwire(CLWR) was slapped with a sell rating Tuesday on fear that it may run out of financing.

In a research note, Merrill Lynch analyst Michael Funk downgraded Clearwire shares to sell and a 50-cent stock target on increased "going concern risk."

The move comes a week after the company told analysts on its Aug. 3 earnings call that it was looking to raise between $150 million to $300 million in additional financing to fund its operations. The company also said it would need to raise even more money to expand into LTE network technology to attract new subscribers.

The company and Funk estimate there is enough cash to run the business for another year. According to the company's most recent filing, Clearwire had $780 million in cash and short-term investments available and $4.4 billion in total debt.

It has been a interesting journey for the WiMax wireless outfit founded by mobile industry pioneer Craig McCaw. Before Verizon(VZ) and AT&T(T) chose LTE upgrade technology, Clearwire's WiMax effort had a big jump on the 4G pack.

The company initially managed to secure funding for its national network ambitions from tech giants Intel(INTC), Google(GOOG) and Comcast(CMCSA). Later it formed a mobile broadband joint venture with Sprint(S).

But this year has been tough. Sprint has tried to distance itself from financial commitments to Clearwire and has since joined forces with rival LightSpeed on a national LTE network plan. The year started with the resignation of McCaw as chairman, and in March, CEO Bill Morrow resigned.

The company told analysts last week that it was exploring options. "I assure you that we are considering all possible avenues available to Clearwire in determining the best path for our company and our shareholders," acting CEO John Stanton said on the call.

The fundraising options could include the sale of assets -- like wireless spectrum -- or an attempt to issue more debt.

Unfortunately, the company needs subscriber growth to bring in more revenue, but without funds for WiMax or LTE expansion, the prospects could get grim.

Clearwire shares were down 8% Tuesday to $1.40, have fallen 35% in the past week.

--Written by Scott Moritz in New York.

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