Clearwire (NSDQ: CLWR) said in its third quarter results that it is taking a number of steps to reduce costs before its cash runs out in mid-2011.
The measures include slashing 15 percent of its workforce, or roughly 600 employees, to an overall headcount of 3,600. It will also reduce its contractor workforce, and cut back on sales and marketing, which includes delaying new retail stores in markets, like Denver and Miami. The Kirkland, Wash.-based company is also holding off on rolling out its own 4G smartphones, which were expected to come by year-end.
The company, which is facing increasing competition for high-speed networks from T-Mobile USA and Verizon Wireless, says it still plans to be competitive and cover up to 120 million people with its 4G network by year end, and that it continues to exceed its subscriber and operational goals. Now is not a good time to be slowing down or cutting back as other 4G-like networks become available by year-end. Just yesterday, T-Mobile USA launched a nationwide TV campaign, claiming it has “America’s largest 4G network.” Similarly, Verizon Wireless expects to launch its 4G network by year-end in 38 U.S. markets all at once. So far, Sprint (NYSE: S), which relies on Clearwire’s network, was the only major carrier to roll out handsets based on 4G. Clearwire was expecting to launch handsets under its own brand sometime this year, but today, it says that initiative has been put on hold.
While the timing is bad for Clearwire to slow down, it has no choice because it still needs more cash to continue its aggressive roll-out of its WiMax network. In a release, the company writes: “We have not yet secured future funding and prudence dictates that we take appropriate cash conservation steps to reduce costs. We continue to pursue all options for future funding including debt, equity or a potential sale of excess spectrum or other assets, and we remain cautiously optimistic that we will resolve our short-term funding needs in the near future.” Without a new injection of capital, it has roughly enough cash to last until mid-2011.
Revenue for the third quarter was $147 million, a 114 percent increase over third quarter 2009 revenue of $68.8 million. Clearwire said it acquired a record 1.23 million new subscribers, and ended the period with more than 2.84 million. To that end, Clearwire updated its annual expectations, and now expects to end this year with an excess of four million total subscribers, nearly doubling its original 2010 estimates. The third quarter 2010 net loss was $139.4 million, or 58 cents a share. Clearwire’s shares fell 9 cents in after hours trading to trade at $7.08 a share.