Clearwire: Subscribers surge, but so does cash crunch; Here come layoffs

Summary:Clearwire projects 4 million subscribers by the end of the year, but the company needs money and is cutting 15 percent of its workforce.

Clearwire is adding subscribers at a rapid clip as its 4G network hits more major cities, but the company's balance sheet has taken a big hit. Now Clearwire needs funding pronto.

First the good news, the company said it added 1.23 million new subscribers in the third quarter to end with 2.84 million. Those gains have the company projecting more than 4 million subscribers by the end of the year.

But those gains come at a hefty cost that will require Clearwire to cut 15 percent of its workforce, trim marketing spending and delay plans for more stores and city launches (statement). Clearwire said its cash conservation efforts will save about $100 million to $200 million in 2010 and again in the first half of 2011.

Simply put, the company is still losing truckloads of dough. The company reported a net loss of $139.4 million, or 58 cents a share. Revenue for the third quarter was $147 million, up 114 percent from a year ago. Wall Street was expecting a loss of 61 cents a share on revenue of $157.9 million.

Those losses are likely to continue as Clearwire rolls out its network. The company said it expects that it will spend $3.2 billion to $3.4 billion in 2010.

That spending means the company is "is actively pursuing a number of options to resolve its need for additional capital." The company is talking to its shareholders, other parties and looking at "strategic transactions." One of those transactions would be rolling Clearwire back into Sprint at some point. Overall, Clearwire said it was "cautiously optimistic" it could resolve its funding needs.

If you exclude the funding worries---it's almost impossible to do that but humor me---Clearwire had a bevy of positive data points.

  • The company launched in New York and is coming to San Francisco.
  • Clearwire said its LTE 2X trials have gone well and the company expects to confirm peak download speeds of 90 Mbps and upload speeds of 30 Mbps.
  • And the company is growing.

The big question is whether Clearwire can raise the funding to remain independent. In either case, Clearwire has assets that would be valuable to someone.

Topics: CXO, Banking, Enterprise Software, IT Employment

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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