“The Golden Egg: WiMax ushers in a new gilded age”

By Travis Johnson, Stock Gumshoe, April 23, 2007

“Its impact will be greater than the railroad… automobile… personal computer… and the cell phone… turning select investors into millionairesUshering in a New Gilded Age

Hey, that sounds pretty good!

This ad came in on April 18th, from Tim Fields and the Untapped Wealth newsletter over at Trinity Investment Research. You can sign up to receive the free report, WiMax: Transforming The Economic Landscape… and Forging a New Breed of Millionaires… all it will take is a $99 subscription payment.

Or, you can come to your friendly Stock Gumshoe and find out the name of this revolutionary WiMax company … for free, of course.

“Now, imagine this: there’s a small company that just came public that controls the second largest percentage of the WiMax market… and has spent the last 5 years laying the framework for this technology to be broadcast across the entire country.”

So this company they’re teasing us about is a WiMax signal company (as opposed to a chip or equipment company like the last WiMax company we teased out). Most of the ad touts the dramatic impact of the wireless revolution instead of specifically teasing this company, but a few specific clues are given.

The ad notes particularly that this is a recent IPO, and tries to hype up the fact that underappreciated IPOs can become barnburners. I don’t know that this hype has been all that useful of late, but it’s good to know this is a new company.

“But what happens when an unknown company goes public touting technology that is still in its early stages? More over, their technology is unbeknownst to the general population? This, my friends, is what we like to call a golden egg. It is rare and extremely valuable.”

So … we’ve got a wireless provider, a recent IPO, and the teases hint that it is not much liked on Wall Street or in the financial press … YET. What specific clues do they provide to help us make sure we get the name of the company right?

More cash on hand than debt (I should hope so, for a recent IPO)

“They are buying up the valuable radio spectrum needed to roll this out in every major city in the world. “

“Currently services cover over 200 municipalities and 27 markets.”

“it’s ready to go in Europe, too.”

And of course, the situation is urgent … “because this company just came public. Wait even just a few days too long and you could pay 40% more for the same stock.” (Actually, you could pay 40% less, too, as you’ll see in a moment when I name the company.)

“Once this company’s profile is raised – it’s going up like nothing you’ve ever seen. If you put $2,000 into it you could walk away $100,000 or more in a very short period of time.”

So what’s the company?

You may have guessed it by now — there aren’t that many WiMax providers out there, certainly not many who serve a large number of cities. So this WiMax golden egg is …

Clearwire (CLWR)

The confirmation comes from the fact that they were in exactly 27 U.S. communities when they filed their IPO papers (more if you count their European markets in Belgium and Ireland), along with the timing of the IPO (they came public last month).

And despite the author’s claim here that this one is undiscovered, I think we all probably saw articles about the anticipation for this pretty high-profile IPO, and the disappointment of investors following said IPO.

Clearwire is Craig McCaw’s new company, and for anyone who doesn’t know McCaw was the founder of the first big wireless phone company in the US, as well as a major investor in Sprint and Nextel in later years, so there were enough folks who were excited enough to get involved in his next project that they scooped up shares at the initial offering … though they didn’t scoop up enough of them to push the price up on the opening day.

And unfortunately, anyone who did invest is probably a little disappointed with their short term results — a bump of 40% at this point would only get it back to right around the $25 IPO offering price. McCaw definitely has made some fortunes — for himself and others — with his previous companies in the cellular space, so maybe he’s worth a bet, but he hasn’t yet worked a miracle here.

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Clearwire is in an extremely competitive space, even though they are one of the few WiMax providers … they’ve got giants like Sprint Nextel and Verizon competing for similar wireless broadband offerings, along with the smaller WiMax upstarts.

And Clearwire, though it already covers a seemingly significant number of communities and has some $100 million or so in sales, trades at a whopping 39 times sales … that’s compared to less than 1.5X sales for Verizon or Sprint, so there’s a long way to go there, and an implicit assumption that there’s some possibility for really outsize profits down the road — not something I’d generally want to count on in a very price-competitive space like broadband, even if it is a new, better wireless broadband.

WiMax may well be the wave of the future — Sprint/Nextel is betting pretty heavily on it, too, with a big rollout scheduled for next year, and from what I know (not much) it is a nice technology. But it’s not the only thing out there, and with many years of losing money to go for Clearwire as they build out a nationwide WiMax network I’d guess that you might need to be patient with this one.

But of course, it’s not about what I think — there’s plenty to read out there about Clearwire, now that you know the name of the company. Most of it’s pretty scary (this ad is one of the few optimistic pieces about Clearwire I’ve seen — but hey, you never make money doing what everyone else is doing), so maybe that means now is the best time to buy.

Since people are now mentioning this in the same breath as Vonage among IPO duds of recent months, maybe there’s a bargain hiding in the muck — feel free to share if you think so (or not). The Gumshoe isn’t interested in this one, but if you are I’d be happy to hear your thoughts.



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W.Fox II
W.Fox II
July 25, 2007 8:04 pm

I for one am a member of the above mentioned service, Untapped Wealth. I originally had my doubts about clearwire and what Mr Fields had written about it in that teaser. However, I stuck to my gut on this one and held (like advised). Anyhow, I am now up pretty good and very satisfied in the end.
I say, Untapped Wealth hooked me up.

W. Fox

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September 26, 2008 5:18 am

I am involved in the operations of a WiMax network, the simpler fixed (802.16d) version of WiMax as opposed to the much more complicated mobile iteration (802.16e). My impression of WiMax so far is not favourable.

The proposed advantage claimed of WiMax was that it would be available years before LTE (Long Term Evolution) which is basically the next mobile upgrade to 3G. Each day that passes shows that this is unlikely to be the case. WiMax is well behind schedule and LTE is ahead of schedule.

Also due to frequency issues (Wimax is normally in the 2.5 or 3.5GHz bands) it’s potential for use in urban areas is extremely limited.

I cannot see how WiMax operators in developed markets will be successful, and I definitely wouldn’t be betting a whole lot of money on a WiMax stock.

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