Clearwire released decent preliminary third-quarter results in an effort to show it still has some fight left in it.
Clearwire was likely under pressure to show something positive as it has been fighting the perception that its largest wholesale customer and shareholder, Sprint Nextel, was abandoning it. Clearwire's stock has been taken a beating since Friday, when, in which Clearwire played a minor role. Clearwire currently supplies Sprint with its 4G WiMax network.
"We view the announcement as favorable and believe the results should assuage near-term bankruptcy concerns for the company," said Michael Nelson, an analyst at Mizuho Securities.
The stock had fallen nearly 40 percent since Friday, hitting $1.31 yesterday. It rebounded today and recently traded above $1.50.
The company, based in Kirkland, Wash., reported preliminary third-quarter revenue of $332 million, up 126 percent over a year ago. It also added a net 1.9 million wholesale subscribers, and ended the third quarter with roughly 9.5 million customers. Clearwire's official earnings will be reported in the next few weeks, the company said, without giving a specific date.
Nelson said he expected the company to have added 1.1 million customers in the period.
Clearwire expected its adjusted loss before interest, taxes, depreciation and amortization to have improved by more than 50 percent in the third quarter when compared with the second quarter.
The company also said it has roughly $700 million in cash, cash equivalents and investments as of Sept. 30.
The strength of the results come largely from Sprint, which has been pushing its 4G WiMax phones heavily in an effort to differentiate itself from the competition. It's unclear, however, how Sprint's 4G lineup will fare with the iPhone 4S coming out tomorrow--Apple's smartphone is only 3G and can only run on Sprint's own CDMA network.
There remains concerns over whether Clearwire can obtain the necessary funding to continue to operate. Many had expected Sprint to bail Clearwire out, but Friday's investor meeting suggests it is dedicating its cash elsewhere. Sprint said it would continue to support WiMax through next year. Sprint CEO Dan Hesse told CNET on Monday that the fact that he isn't talking about plans with Clearwire beyond 2012 shouldn't be an indication that there won't be plans eventually.
Despite the fears, Nelson said the relationship between Clearwire and Sprint won't end any time soon. He added he believes Sprint will continue to rely on Clearwire's network beyond 2012.
Clearwire still needs $150 million to $300 million in additional cash to fund its operations, and another $600 million to fund its move to LTE. Clearwire CEO Eric Pruschby the fourth quarter.