Beware the "rear-view-mirror"... Use all 3 Perspectives
Here are the perspectives we're looking at:
1. Rear View Mirror: Verizon has announced they're lighting up big-time by New Years. T-mobile is now claiming "4G" in a fresh advertising blitz. No new funding at CLWR and cost cuts are upon us...
... the rear-view-mirror is ugly and the $6.88 A.H. stock price is pricing in all the ugly.
2. Short-term Outlook: This 2nd perspective is almost entirely the "imminent funding" issue... eg: the bad news is here and the good news remains a mystery... perfect fodder for the current $6.88 stock price...
... an attractive price given it reflects the reality of the bad news and apprehension regarding the good news to come.
The 4-million + year-end subscribers is non-news since it's already baked into what's "known" and implicit in the stock price right now.
3. Long-term outlook: 4-million plus subscribers... mostly joined-at-the-hip with wholesale partners means, for lack of another term, "too co-dependent to fail".
That means, the network will get built fast... it must... and CLWR will thrive... possibly as a boom-stock... and possibly as a mediocre "cost-based tool" of it's partners forever mired as a $5 to $10 stock.
But survive it will; there's too much co-dependency... to much state-of-the-art infrastructure... too much precious spectrum. Owning this stock for $6.88 is seemingly like having an automatic, protective-"put" underneath it...
... it might not shoot the moon, Virginia, but it can't go down much without dragging a ton of valuable assets worth more than $25 a share along as a boat-anchor as it drops.
My expectation all along has been for the business to build to positive cash flow at a pace that would require more funding and for a large percentage of subscribers to come from wholesale partnerships. That places Clearwire in a different category of operator than what has been the norm in N. America. Harbinger's plans are to go to a wholesale model entirely - however that turns out it indicates that the wholesale model is likely to become a growing facet of wireless/ICT going forward. Part of the rationale for this is that it fits well with the nature of open IP access and applications driven markets. in addition, a major part of whatever model is adopted for 4G must harness innovation at a pace that is impossible for even the largest, most experienced operators to do themselves... let alone a bootstrapped start-up that is building a network for a fraction of the customary 3G network cost.
The 'Google model' is to facilitate others to do things by building the right frameworks. That is part of what made Microsoft a success as well - the harnessing of 100s of thousands of developers and value added resellers and service providers. Now MS is hitting up against the more open, distributed 'broadband everywhere' cloud 4G business paradigm and is losing relevance. (Of course they are responding similar to the way walled garden operators respond - trying to lock down software sales while opening up more to cloud enabled apps and services.)
Clearwire has the right business model for the ICT world but the question remains one of timing: 1) Growth of apps, devices, subs, and broadband demand. 2) Timing for acquisition of more capital. My guess is that if Clearwire had gotten another $1.5-$2 billion previously that they would be out until well into 2012 for more funding and would have no problem getting it. That is because both 3G and 4G BB demand will continue to escalate, more devices would be available for both WiMAX and for the then ready for prime time LTE, and incumbent operators would be pressured more into doing a deal.
T-M, MetroPCS and others have said they need more spectrum. However, these are competitors who are managed by people almost as pig headed as myself... they will sometimes shoot themselves in the foot rather than change their modus operandi... (are lessons needed from Nokia, Motorola, etc.?).
... at it's basic level, what CLWR is for backhaul, they're probably best suited for local carrier as well.
I I may muse... 3 sprint board members made way for something that I believe is one-step removed from CLWR remaining as a significant "direct retail competitor" and the wholesale vs retail net new subs in Q3 bear that out... service Sprint, don't compete with them so much.
Similarly, if they're providing infrastructure as a wholesaler for sprint-et-al, why not T-mobile... they're still talking and CLWR is blatently NOT criticising their HSPA+ claims to 4G status... meaning... CLWR is clearly marking their turn as a wholesaler to everybody who ISN'T Verizon and AT&T.
High tech is about pluralism now... hardly ANYBODY is very vertically integrated. Retail product producers don't make their own chips, chipmakers do... and chipmakers don't run their own foundarys... outside of INTC, they ALL use Taiwan Semi or indian outsourcers for talent like Infosys or Cognizant.
To compete with Verizon and AT&T, I think the model will be that everybody else will leverage thru CLWR and, if the overall success of high-tech pluralism is any indication, I think CLWR will end up empowering the retail collective in a way that will give them advantages over Verizon and AT&T, not immediately, but 3 to 5 years from now with the kind of resolve I sense if brewing.
I'm starting to think, with this wholesale-intensive veer and subscriber ramp, that the spectrum auction aint gonna happen... that it'll be a venture with T-mobile and/or others and LTE/WiMax redundancy on the towers.
The risk remains that CLWR will wind up an infrastructure/wholesale tool of the retail consortium, and the chance of perpetual skimpy margins that might accompany that, but in that role, CLWR would be a critical tool indeed, with more downside buffering than even I suspected...