Clearwire announces layoffs and cost cuts as it looks for funding

sprint and other investors give clearwire 1 5b in financing logo

The claims of T-Mobile notwithstanding, Clearwire’s WiMax network represents the only operational 4G mobile network in the United States, and the company just lit up the New York City area and plans to bring important markets like San Francisco, Washington D.C., and Los Angeles online by the end of the year. So the company ought to be rolling in money, right? Not so. Although Clearwire says it saw record subscriber and revenue growth in the third quarter of 2010, the company is struggling to find the money to continue its rollout of WiMax services. Until Clearwire can secure that money, it’s taking some “cash conservation steps,” including laying off some 15 percent of its workforce.

“While we continue to exceed our subscriber and operational goals, we have not yet secured future funding and prudence dictates that we take appropriate cash conservation steps to reduce costs,” said Clearwire CEO Bill Morrow, in a statement. “We remain cautiously optimistic that we will resolve our short-term funding needs in the near future.”

If Clearwire continues on its present court, the company may run out of cash my the middle of 2011. The layoffs and new cost reduction measures should save Clearwire between $100 and $200 million in the first half of next year, but Clearwire indicates that won’t be enough to cover its expenses. Morrow says almost all options are on the table for securing future funding, including debt and equity deals—which would have the company sell off portions of itself in exchange for capital—as well as a sale of excess spectrum or other assets. Clearwire hasn’t said how much cash it needs, but reports have the company mulling potential spectrum license sales to the likes of AT&T and Deutsche Telekom (T-Mobile), which could net up to $5 billion.

Mobile operator Sprint is Clearwire’s majority shareholder, with a 54 percent stake in the company. Clearwire acquired over $1.5 billion from Sprint and other investors last year; since then, investors like Comcast have indicated that they are unlikely to continue to pour money into Clearwire.

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