WiMax in the balance? Not yet but it's getting dicey
Intel says it's not putting any more dough into WiMax. Founder Craig McCaw knows how to sell an idea-but even he's running into a brick wall called the recession.
Until now, Craig McCaw was most famous for starting the eponymous cellular company that he sold to AT&T in 1994 for $12.6 billion.
This serial entrepreneur wasn't as fortunate with his next venture: the construction of a satellite-based broadband communications system. Before it flopped, though, McCaw received financial backing from Bill Gates and a bunch of other well-heeled backers, who invested more than $292 million into the venture.
After the dot-com bust, McCaw set out to offer portable wireless high-speed Internet service. His company, Clearwire, clearly qualified as one of those BIG IDEAS: WiMax is said to allow for wireless Internet service that's five times faster than 3G networks.
So far, Intel, Google, Comcast, Time Warner Cable, and Bright House Networks have ponied up $3.2 billion in Clearwire and its operating subsidiary (for about 22 percent of the company.) Each of those investors has an obvious interest in facilitating a wireless Internet outside of the phone companies, which are adopting Long Term Evolution format, a rival technology expected to become available in 2010.
But now, McCaw and Clearwire face a potentially huge headache. Bloomberg is quoting Clearwire CEO Ben Wolff acknowledging the impact of the recession on credit (and investors.) The upshot: Clearwire may be forced to put its network expansion plans on hold if it can't raise another $2 billion.
Wolff declined to say whether Clearwire would have to delay the project, but he nonetheless did acknowledge the obvious:
"It's clear that capital markets are closed for either borrowers or companies that are trying to raise capital, regardless of what kind of company it is," Wolff said. "We've seen challenges across the board."
That's putting it mildly. In the last year, Clearwire's investors have watched their shares lose more than 75 percent of their value. Clearwire's management needs to sell its partners on sticking around, let alone putting more money into the pot. McCaw knows how to sell an idea-but even he's running into a brick wall called the recession.
So it was that a senior Intel executive today shot down any suggestion it was planning to bail out Clearwire.
"They've got enough money to keep going for quite a while," Sean Maloney, the company's sales and marketing head, said during a conference call. "They've got a pretty fat piece of capital to go out and build the network."
That's not the news Clearwire wanted to hear. But given current events, where so many companies are pushing the reset button, Intel's message only restates what's now obvious to everyone. It really is a new world order.