Google Snips Clearwire at $443 Mil Loss
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Google (NASDAQ: GOOG) has announced plans to sell its 6% stake in wireless internet service provider Clearwire (NASDAQ: CLWR). Google bought its stake in 2008 for $500 million and will sell its 29.4 million shares for $1.60 a pop. That makes the total sell price $47 million -- a $443 million loss. The search giant will first offer the shares to other Clearwire investors and then, bearing a lack of interest, will list them on Nasdaq. This process is likely to go down next week.
Sprint (NYSE: S) owns the largest chunk of Clearwire voting rights with Intel, Comcast (NASDAQ: CMCSA), and Time Warner (NYSE: TWX) representing smaller pieces of the pie:
It's unlikely that Comcast or Time Warner will step up to grab Google's dumped shares. The companies previously had wholesale agreements that allowed for the repackaging and sale of Clearwire's WiMax mobile services. That dependency ended recently when both companies signed deals to bundle Verizon services instead.
Sprint has to stay with the ship. It relies on WiMax for its 4G phones, though the recently launched and wildly popular Sprint iPhone doesn’t run on that service. Sprint was forced to bail out Clearwater late last year to the tune of $1.6 billion. (Google declined to help out, an early indication that it was getting ready to jump.) The bailout funds will help finance Clearwire’s goal of building over 5,000 TD-LTE networks in the next year, a project that’s meant to lessen the company’s dependence on WiMax. Sprint is also committed to paying out $350 million over two years to use the built TD-LTE, assuming it adheres to outlined specifications.
Despite the string of bad news, the bells aren’t quite yet tolling for Clearwire. Potential competitor LightSquared was denied FCC permission to build its own mobile network due to potential GPS interference. Clearwire also recently reported a mixed fourth quarter that included losses of $236.8 million but a revenue more than doubled, year-over-year, to $361.9 million. Then there’s the simple yet ugly fact that Clearwire won’t fail because Sprint can’t let it fail.
Clearwire shares closed Friday down nearly 7% to $2.11, compared to a 52-week high of $6.11. Sprint was down 2% to $2.47, not far above its 52-week low of $2.10.
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