Shareholders of Clearwire Corporation (NASDAQ:CLWR) had a good reason to be happy yesterday, as the stock closed up 12%.
There are two factors which are most likely to have influenced the performance of CLWR. One is the performance of Sprint Nextel and the release of their earnings yesterday morning. The other is the anticipation of CLWR’s own earnings, which were announced after the close.
Today’s performance will largely be a reaction to the earnings call. The results were ambiguous with CLWR reporting better sequential EPS, although at negative $0.33 they are still worse than analysts’ estimates.[BANNER]
Shareholders were happy to learn that CLWR had managed to reduce the costs even further, but CFO and SVP, Hope Cochran, stated that the run rate could go up slightly in the next few quarters, due to expenses related to the development of CLWR’s LTE network.
Still, the situation at CLWR can hardly be described as perfect. Despite the significant reduction in what the company spends and some additional cash coming from retail, CLWR is still losing millions and it’s not clear when and if the company will manage to turn a profit.
For 2011, the President and CEO of CLWR, Erik Prusch, got more than $5.5 million in salary, bonuses and stock awards. Even though the company has definitely made progress in some areas, shareholders may wonder if that’s enough to warrant $5.5 million.
The situation with CLWR’s funding is anything but certain in the long term. Right now the company has enough capital to sustain and grow operations, but when the need for additional financing arises, the company could be in some trouble.
Further equity financing would be extremely dilutive to shareholders and debt is not a viable option either. This problem has been identified for a while and the answers coming from the company haven’t changed much since the end of Q1.
One possible source of additional capital could be the sale of surplus spectrum, and with more and more mobile users hungry for high speeds and more data transfers, CLWR may be in a good position to take advantage. However, so far it’s not clear how well that could work out, if it works out at all.
Arguably the most encouraging information for CLWR shareholders is that the company lowered its forecast for the 2012 adjusted loss and raised the revenue target range. Today may show how traders reconcile the positive developments against the continuing losses and the dismal stock performance.
