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BOSTON (TheStreet) -- Clearwire (CLWR) and Xohm, the wireless broadband unit of Sprint Nextel (S) - Get SentinelOne Inc. Class A Report, merged in 2008. Clearwire is aggressively building its 4G WiMAX infrastructure, using market clustering in urban areas. Its WiMAX technology offers mobile broadband at speeds often four times faster than 3G. Markets include Atlanta, Chicago, Houston, Philadelphia and Washington, D.C. Two issues currently face Clearwire: Its first-mover preference for WiMAX may have been a misstep as LTE, or long-term evolution, is emerging as a favored 4G technology. And expanding, though foreseeable, losses are hurting its stock.

Clearwire's second-quarter loss widened 72% to $126 million, or 61 cents a share, from a loss of $73 million, or 38 cents, a year earlier. Revenue surged 93%. Gross, operating and net margins remained in deep negative territory. However, Clearwire has $2.3 billion of cash and $2.8 billion of debt. The company predicts coverage capability for 120 million people by the end of 2010. It added 722,000 net new subscribers in the quarter and posted a churn rate of 3.2%. The recently launched iSpot, compatible with Apple's suite of devices, including the iPad, iPod Touch and iPhone, is a "personal 4G hotspot" likely to attract tech-savvy subscribers in urban areas with coverage.

Clearwire's stock has dropped 9% since its quarterly release. Its 61 cent per share loss missed the consensus estimate of 53 cents. The top-line tally missed researchers' median estimate by 5.8%. However, the real negativity stemming from the quarterly report is the company's announcement of new trials to test coexistence scenarios between LTE and WiMAX. It is purportedly considering a new hybrid technology, which has hurt sentiment for its already capital-intensive 4G WiMAX build-out. However, the threat from LTE remains latent. Clearwire added new wholesale partner

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during the quarter and boosted its 2010 subscriber forecast to 3 million.

Of analysts covering Clearwire, six, or 38%, rate its stock "buy", eight rate it "hold" and two rank it "sell." A median target of $9.01 suggests a return of 46%.



values the stock at $12, leaving 94% of upside.


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expects it to gain 62% to $10.


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predicts that it will rise 46% to $9. Analysts' lukewarm position differs markedly from that of the stock's holders. Of the thirty largest investors, 20, including

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rank as the largest and third-largest shareholders, holding 15% and 12% of the float, respectively. Clearwire's stock trades at a book value multiple of 3.5 and a sales multiple of 16, premiums to peers. It has fallen 9% in 2010 and 7% in 12 months, lagging indices. Clearwire is targeting $3 to $3.2 billion of cash spending in 2010. It burned through $1.9 billion for operations, capital expenditure and spectrum in the first six months. In order to finance further build-out, a debt or equity offering is likely to be necessary. Management cites a need for substantial additional funding as a major risk.

Although Clearwire boasts the fastest-growing 4G sales, technological uncertainty is prevalent. Proliferation of smart-phones and hand-held broadband devices is an indomitable trend, but it seems safer to buy shares of consumer-oriented


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than to gamble on future network-operators. Still, Clearwire's growth and new partnerships are intriguing. The soon-to-be-released Samsung Epic will run on Clearwire's network and a dual LTE/WiMAX network has received support from some tech-oriented analysts who argue that utilizing both technologies may be a sound strategy.

The Epic 4G rolls out on Aug. 31. A positive consumer reception may benefit Clearwire shares.

-- Reported by Jake Lynch in Boston.


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