Bloomberg News

Clearwire Drops as Google Plans Stake Sale: Seattle Mover

February 24, 2012

Clearwire Corp. (CLWR), the unprofitable wireless-broadband provider, fell the most in two months after Google (GOOG) Inc. said it plans to sell its stake in the company.

Clearwire declined 6.8 percent to $2.11 at the close in New York for the biggest one-day slump since Dec. 20. The stock has tumbled 56 percent in the past 12 months. Google, based in Mountain View, California, plans to sell the company’s stake at $1.60 a share, according to a U.S. Securities and Exchange Commission filing today.

The sale of the stake, for less than a tenth of what Google paid for it, comes amid increasing obstacles for the loss-making carrier’s prospects, said Christopher King, an analyst with Stifel Nicolaus & Co. in Baltimore. The Bellevue, Washington- based company said this month that it may need new capital to fund operations beyond next year as losses widened in the fourth quarter.

“Clearwire has had financing challenges,” said King, who recommends holding the shares. “It’s got some business-model challenges, with the dominance of Verizon and AT&T,” he said in a telephone interview.

Google owns 6.5 percent of Clearwire, or 29.4 million shares, according to data compiled by Bloomberg. At $1.60 a share, Google’s holding would be worth $47 million.

The company will offer the stake to other Clearwire equity holders, including affiliates of Intel Corp. (INTC) and Middlefield Ventures Inc., the filing showed. If they don’t purchase the entire stake, Google will make the remainder available, in one or more open-market transactions, beginning on about Feb. 27, Google said. Other Clearwire owners include Sprint Nextel Corp. (S) and Comcast Corp.

2008 Investment

Google invested about $500 million in Clearwire in 2008 as part of group of communications and technology firms, including Sprint, Comcast, Time Warner Cable Inc. (TWC) and Bright House Networks LLC, which combined invested $3.2 billion. The purchase was part of a plan to reshape Clearwire into a company with 4G, or faster fourth-generation network technology.

Intel Corp. wrote off $938 million of its Clearwire investment in 2009, following a decline in the company’s share price.

Sprint owns about half of Clearwire and uses its network to offer higher-speed wireless service to its subscribers.

Clearwire reported a loss of 81 cents a share in the fourth quarter, from a loss of 79 cents a year earlier. In December, the company had said it was raising $595 million through two sales of common stock to build its LTE network.

Susan Johnston, a spokeswoman for Clearwire, declined to comment on the matter. Jim Prosser, a Google spokesman, declined to comment beyond the the company’s regulatory filing.

“Google periodically rebalances its investments based on its goals and its evaluation of market conditions,” according to the filing.

To contact the reporter on this story: Alexander Yablon in New York at ayablon@bloomberg.net

To contact the editor responsible for this story: Ville Heiskanen at vheiskanen@bloomberg.net


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