Google taking $453M loss with sale of Clearwire stake

Google is selling its shares in wireless Internet service provider Clearwire at a steep discount - and potentially taking a $453 million loss on the deal.
Written by Matt Weinberger, Contributor

Turn the clock back to 2008: Google solidified its high-profile partnership with wireless Internet provider Clearwire with an investment of $500 million. But on Friday, citing changing market conditions, Google has announced that it's seeking to sell its 6.5 percent stake in Clearwire for about $47 million - a discount of 94 percent, representing a $453 loss for the search giant.

"Google periodically rebalances its investments based on its goals and its evaluation of market conditions," Google said in its filing. No other explanation was given.

The search giant is giving other Clearwire investors - including Time Warner, Intel, Comcast and especially Sprint, which holds a 49 percent voting share in the company - the chance to purchase its 29.4 million shares at that discounted price before offering them up to the general public (at less of a discount, thus lowering the potential loss).

It's not hard to see why Google might be trying to escape its obligations to Clearwire - the nine-year-old company has warned that it may need to acquire more capital to continue operations into 2013, even as it harbors ambitions to build a 4G LTE mobile broadband network of its own. Sprint reportedly owes Clearwire $600 million for unlimited access to its WiMax network.

WiMax never caught on in the way Clearwire hoped, and while I don't know for sure, it sounds like Google doesn't have much faith in the company's transition to 4G. With the Google Fiber project underway, the search giant may find that it has enough ISP problems to worry about.

If I'm right, this move is a risky bet on Google's part, as its essentially hedging $453 million against Clearwire failing to successfully make the transition to LTE. If Google is wrong, that would be a costly mistake. But if Google is right, well, it could have lost a lot more than $453 million.

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