- Even Clearwire's Financial Advisers Find The Company's Stock Unattractive

Tricia Duryee
Monday, December 8, 2008; 5:00 PM

Two investment banks that advised Clearwire during its transaction with Sprint (NYSE: S) Nextel have resumed coverage of the company, and are offering a not-so-bright view of the future. The transaction by itself was a positive one for Clearwire (NSDQ: CLWR). By merging its operations with Sprint's WiMax division, it will have enough spectrum to roll-out a nationwide network. Plus, it was able to raise $3.2 billion it desperately needed cash from Google (NSDQ: GOOG), Intel (NSDQ: INTC) and a host of cable operators. However, analysts remain skeptical that the cash will be enough to fund its long-term plans and whether Clearwire will be able to differentiate itself to consumers in a deepening recession. The company's stock is currently trading at around $4.54 a share, up 54 cents today.

Today, Barron's reports that Morgan Stanley has resumed covering Clearwire's stock after suspending coverage while it was advising Clearwire on it's purchase of Sprint's WiMax division. It's role in the deal didn't make Analyst Simon Flannery any more bullish on the stock. Although he remains positive on the general trend in wireless data growth, his "underweight rating," points to his concerns. He writes: "We believe the build plan appears likely to be slowed down, reflecting in part the tough financing markets." He adds that with positive free cash flow some years away, the risk-reward is "unattractive."

Last week, another J.P. Morgan did the same thing. After helping the company close the deal with Sprint, J.P. Morgan Analyst Mike McCormack simultaneously resumed coverage and downgraded the stock from "overweight" to "neutral," reports Barron's. He wrote: "While we believe Clearwire has amassed an attractive spectrum position that enables the delivery of competitive wireless speeds, we are concerned about the competitive landscape for both residential and mobile services, the impact of the weak economy and the appetite for business partners to sell Clearwire services."

More on other analyst opinions after the jump....

It's not only advisers who are being negative. Barron's reported that Stanford Group's Michael Nelson cut his rating last week to Sell from Buy, and drastically slashed his price target to $4.50 from $15. He writes: "With consumer spending declining, wireless subscriber growth decelerating, and competition from alternative technologies intensifying, we believe Clearwire is likely to have a difficult time capturing incremental demand for its wireless Internet service." Today, Merrill Lynch analyst Michael Funk followed suit, marking down his price target from $20 to $5.50. Funk is also concerned about the company's ability to raise enough cash, given it faces a projected $3.3 billion funding gap in a challenging capital market.


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