Clearwire reports Q4 earnings: staff, marketing, stores, and handset plans all scaled back
Though it reported record growth in both revenue and subscriber count, Clearwire's bad news outweighed the good as it announced its fourth quarter earnings today. Here's the meat of it:
"The Company is actively pursuing a number of options to resolve its need for additional capital. The Company is in discussions with a number of its major shareholders and other third parties about a number of options, including potential strategic transactions, additional debt or equity financings and/or asset sales. While the Company is cautiously optimistic it will resolve its short-term funding needs in the near future, there can be no assurances. Thus, it is implementing a series of significant cash conservation measures to reduce costs, including: a substantial reduction in sales and marketing spending, a suspension of additional retail channel market launches of the CLEAR-branded operations in select markets including Denver and Miami, delays in the introduction of CLEAR-branded smartphones, a substantial reduction in the contractor workforce, a 15% reduction in the number of employees, and the discontinuation of development activities for sites not required for its current build plan. The Company currently has thousands of sites in various stages of planning and construction beyond its current build plan, and it intends to suspend zoning and permitting in a portion of those sites until such time as additional funding becomes available."
Translation: they're running low on cash, they're looking for ways to raise more of it, and until they do, they aren't launching those promised Clear-branded phones or opening any more retail locations. They're also cutting staff by 15 percent, scaling back Clear marketing, and suspending network planning beyond stuff that's already in the works -- a pretty drastic step considering how much build-out Clearwire's network still needs. Though Sprint depends heavily on Clearwire for its current WiMAX setup, it's unclear whether Sprint would be willing to continue to dump cash into the partnership -- particularly considering the recent rumors that they're looking to reach out to other carriers -- and Comcast has already gone on record saying they don't see themselves turning into a Clearwire ATM.
Obviously, both Clearwire's spectrum holdings and its infrastructure are extraordinarily valuable and we wouldn't sound any alarms that Sprint's WiMAX network is in any danger of disappearing, but we're sure this is sounding some alarms at Sprint headquarters that it's time to make some strategic moves. Should be interesting to see how this all plays out.
