SAN FRANCISCO -- With gadgets taking center stage at this week's Consumer Electronics Show in Las Vegas, Intel ( INTC) is touting the wonders of WiMax -- the high-speed wireless network that the chipmaker envisions will connect everything from smartphones to mini-notebook PCs. But while Intel's marketing folks diligently spread the WiMax word at CES, the company has been equally busy striking deals around the globe to ensure the wireless network - and its companion chips -- get off the ground. Intel recently announced a deal to build a WiMax network in Moscow in collaboration with Comstar, and the company teamed up with Japan's KDDI in September. Now there are signs that Intel may be readying another big WiMax deal, this time closer to home. Two weeks ago, Arvind Sodhani, president of the company's Intel Capital venture arm, resigned his seat on the board of Clearwire ( CLWR), a WiMax service provider in which Intel has a roughly 30% stake. The press release announcing the resignation explained that it was in order to "avoid any conflicts of interest that might arise." That has raised speculation among analysts that a transaction in the works. "It certainly seems like it's not in the very initial stages," says McAdams Wright Ragen analyst Sid Parakh of a potential deal by Intel.
It's impossible to know exactly what Sodhani's conflict involves, of course -- an Intel representative said Sodhani stepped down because his busy schedule at Intel meant he couldn't devote his full attention to Clearwire. But the tea leaves provide some intriguing clues that point to alternative explanations. Sodhani will be replaced on Clearwire's board by another, yet-to-be-determined Intel representative. And Intel mobility group manager David Perlmutter will retain his seat on Clearwire's board. This implies that the conflict may not be about Intel, so much as Intel Capital, and could suggest an imminent investment by Intel Capital. And given that Intel Capital's recent string of overseas WiMax investments haven't triggered any conflicts of interest with Clearwire, the deal could be on U.S. soil, where Intel and Clearwire have plans to roll out a co-branded mobile WiMax service at some point in the future. One potential scenario involves Intel boosting its funding to Clearwire itself. As the man who controls the purse strings for Intel Capital, a decision by Sodhani to provide more funding to Clearwire might have prompted him to step down from Clearwire's board, to avoid being on both sides of the deal. Clearwire, with its stock down nearly 50% since July, could use all the help it can get. Its plans to erect a nationwide mobile WiMax network in the U.S. were
recently frustrated when a deal to collaborate on the buildout with SprintNextel ( S) fell apart.
An Intel representative said the company does not comment on future investments that the company may or may not make. Even building a scaled-down mobile WiMax network is extremely expensive. Stifel Nicolaus analyst Christopher King reckons Clearwire will need an additional $3 billion to $4 billion to move ahead with its current business plan of providing mobile WiMax service in limited regions of the U.S. And with Intel
slated to roll out WiMax chips for notebooks in May , the chipmaker has a keen interest in ensuring that those notebooks actually have a connecting network. According to King, the longer it takes for WiMax service to be introduced, the greater the threat that it could be rendered obsolete by rival wireless technologies like LTE, or Long Term Evolution, the next-generation of the GSM standard used by many cell phones today. "WiMax is something that in our view is going to have to get done sooner rather than later," says King. "The window opening for WiMax technology is going to be pretty brief." In the U.S., SprintNextel is the only other WiMax game in town at this point, and that company's plans to build a WiMax network are also somewhat shaky, following the ouster of CEO Gary Forsee . SprintNextel says it remains committed to WiMax -- the company is currently testing the wireless service in Chicago and Washington D.C. and plans to offer commercial service in several U.S. cities later this year.
But many analysts believe that SprintNextel's other problems could cause it to
spin off the WiMax division into an independent entity, in which Intel's capital could come in handy. Meanwhile, a slice of wireless spectrum that's well-suited for WiMax is set to be auctioned by government regulators on Jan. 24. Among the hundreds of companies lined up to bid on the 700Mhz band of spectrum are the usual array of telecommunications firms, as well as companies like Google ( GOOG) and even Chevron ( CVX). Intel isn't on the list of bidders, but McAdams Wright Ragen's Parakh says it could play a role in the auction by teaming up with and funding another bidder. "From an Intel standpoint, all they want is that WiMax grows," says Parakh. True, the auction format makes 700Mhz an extremely expensive way to get in the WiMax game. But as Current Analysis analyst Peter Jarich points out, in addition to the top-shelf nationwide 700Mhz spectrum, various regional chunks of 700Mhz spectrum will be on auction --and these will likely sell for significantly less. A WiMax patchwork may not make for the grandest introduction, but if provides a way for Intel's wireless chips to prove their worth, it may be good enough.