WiMAX Slips: Backers Suffer, Clearwire Spins on Devices

You don’t really need embedded WiMAX to use WiMAX, Clearwire Corp. says. Huh?

That’s the word from the company that’s struggling to build out a nationwide 4G wireless broadband network based on the WiMAX standard even as backers like Intel Corp. and Time Warner Cable say they’ll be taking write-downs for the fourth quarter on their strategic investments in the company. Comcast Corp. is also expected to take a hit for the first round of fiscal backing in Clearwire.

The people responsible for creating devices to make use of Clearwire’s network — which is so far available in Baltimore and Portland, Ore. — have shown signs of fatigue as network build delays and these funding issues plague the company. For instance, Nokia Corp. said last week it would discontinue its WiMAX-enabled Internet tablet, eliminating the only device beyond a basic modem that’s available to make use of WiMAX’s broadband goodness. And the release of those modems has been slow to roll out.

No matter, said Clearwire chief strategy officer Scott Richardson to trade pub Telephony. Nokia stopped production of the tablet because Clearwire didn’t want to sell it, he explained. And the real initial goal for Clearwire is to hook up devices like the iPod Touch. Anything that has Wi-Fi can be connected via a WiMAX “pocket” router that hooks up Wi-Fi devices to the greater WiMAX network, converting the signal.

“The initial goal is to connect the devices our customers already have, not requiring them to go out and buy new devices with WiMAX,” said Richardson.

If consumers take that to heart, and can get past having to plug into a router just to use what they can use natively in a Wi-Fi hotspot that costs the same or less to tap into, that might put a crimp in sales of WiMAX-embedded laptops (with the Intel Centrino 2 processor), promised from Acer, Asus, Dell, Fujitsu, Lenovo, Panasonic, Samsung and Toshiba by the second quarter. Intel is also planning on embedding WiMAX into netbooks and other handhelds using its Atom processor.

But more than likely the “just use Wi-Fi gadgets” statement is a product of Clearwire hedging its bets. It has said it would require another $2 to $2.3 billion to close a funding gap following the strategic investment that closed in November, and meanwhile it has seen its stock price fall 85 percent from its peak 18 months ago. ThinkEquity analyst Neeraj Singhania — who still maintains a buy rating on the stock — says it will actually take more like an extra $3 billion to shore up the company through its break-even point of 2014. But with the news that Intel will have to take a $950 million write-down on its own $1.6 billion infusion into that original strategic investment, and with Time Warner Cable saying it’ll be writing down $350 million, the possibility of raising additional funding in the current environment seems dicey. That is, unless it comes from federal broadband subsidies or an investor like Google Inc. that can afford to see the WiMAX promise to its conclusion and has a real stake in the idea of pervasive wireless broadband — in Google’s case, to drive adoption of its cloud services and Web apps. Thus, it is imperative for Clearwire that consumer adoption start to take off, and soon. And that means devices need to be available.

At least one analyst firm believes Clearwire will solve that device issue. “We believe device availability is an important gating factor to driving strong adoption of WiMAX services,” said Singhania. “On the device front, we expect many new devices available by midyear, most or all certified by the company. By 2H09, we expect most new devices to be certified by the WiMAX Forum, leading to more rapid certification and availability, as well as global interoperability. At last week's CES convention, the proliferation of embedded WiMAX devices was very impressive, perhaps best represented in Intel's booth.”

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