Clearwire
Allan is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Why would Clearwire (NASDAQ: CLWR) pick China's Huawei for a continued equipment build out? Even after the FCC and other commissions have stated they consider anything from China a Security issue.
If you look into the new owner of Sprint (NYSE: S) you'll find a 70% stake purchased for just under $20 billion driven by CEO Masayoshi Son. With ownership in Yahoo! Japan, Vodafone and other telecommunication and media holdings, Son has become a Guru! However if you look into the vision of Son you will see he wants into the China Market. Well dosn't everyone?
To travel to the point at hand Son buys 70% of Sprint; Sprint owns 51% of Clearwire. Clearwire now announces buying equipment from the Chinese. I will state that Clearwire has purchased equipment from China's Huawei in the past but under 5% and certainly not after the US Government came out with such a strong and sharp statement about the Chinese.
What about Masayoshi Son's Vodafone ownership? Verizon is also a CDMA Technology based cellular service provider. Why is this important?
- When sprint bought Nextel it was awful. You had a CDMA based technology cellular service provider buying a company providing service over an IDEN network. Talk about equipment, plant, and coverage issues.
- When Cingular bought AT&T they where both on the GSM 950 and 1800 MHZ cellular technology. Good match and easy conversion for handsets, network, and coverage.
- Now with the only GSM service left is T-Mobile, which AT&T tried to buy earlier this year.
- So with some small companies like Metro PCS which runs on CDMA cellular Technology. Metro PCS would be smart to hop on the buyout wagon with sprint.
- To circle back Verizon is also a CDMA Cellular Technology company.
Do most people realize that Vodafone owns a 50% stake in Verizon Wireless. And Son owns a majority of Vodafone.
Never mind, with Yahoo's (NASDAQ: YHOO) new financial numbers are they the next target on Son's list?
Yahoo! reported third quarter non-GAAP earnings that were up 31.2% sequentially and 81.0% year-over-year, exceeding the consensus estimate by 11 cents, or 45.8%. The average surprise in the preceding four quarters was 26.0%, so the quarter’s results were very strong in comparison.
The company also reported GAAP revenue of $1.20 billion, which was down 1.3% sequentially and 1.2% year over year. TAC costs were down 17.7% sequentially and 22.2% from last year. Excluding these costs in all periods, net revenue was essentially flat on a sequential basis and up 1.6% from last year, in line with the consensus.
Furthermore, Yahoo! has a solid balance sheet, with cash and short term investments of $8.41 billion, up $6.50 billion during the quarter. The company generated $1.05 billion from operations in the last quarter and spent $139.9 million on capex.
After adjusting for this and excess tax benefits from stock awards, free cash flow came to around $920.4 million, up significantly on a sequential basis. The company also spent $190.4 million on share repurchases in the last quarter. Yahoo! does not have any debt.
Will Son try to beat Google to the punch. Son has a Majority ownership in Yahoo! Japan.
Imagine owning a Cellular and Media network with access to billions of users. With his relationship with Apple, a Yahoo! purchase would be incredible. Apple has been trying to push Google out and off its hand sets.
So now you would have a company with a foothold in Japan, USA, and Europe. It would have the media presence of Yahoo! all tied into the most highly sought after phone, the iPhone, given they're the exclusive carrier of the phone in Japan.
So Sprint just got $3.1 billion as the first installment. What is the next play?
Buy Clearwire, Yahoo! and control the product from end to end.
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