Clearwire Spikes on News of Extended Partnership with Sprint

Joel Anderson |

Stock in the Clearwire Corporation (CLWR) jumped nearly 20 percent on Wednesday after news that their service partnership with the Sprint Nextel Corporation (S) will extend past 2012.  Sprint is Clearwire's biggest customer and majority owner and news of negotiations on a new deal brought investors back to Clearwire in droves.

Out with the Old, In with the New

News on October 7th that Sprint intended to stop selling devices using Clearwire's WiMax in 2012 prompted a 32 percent drop in Clearwire's stock on fears that Sprint would end the partnership.  However, reports today indicate that Clearwire is in negotiations to sign with Sprint to provide customers with Long Term Evolution, or LTE, services beginning in 2013, driving shares up to finish the day with a gain of 19.51 percent.  Kirkland, WA based Clearwire will need nearly $1 billion to make the shift, costs that Sprint has yet to sign on for.  While the news is positive, it hardly salvages what has already been a rough year for Clearwire, down 73 percent from its 52 week high in November of last year.

Problems Persist for Sprint

While Clearwire received a much-needed boost today, Sprint continues to struggle.  Investors went into a massive sell-off two weeks ago when the company failed to reveal enough information about the costs of its transition to carrying iPhones and its relationship with Clearwire. The lack of disclosure cost the stock 37 percent of its value earlier this month. Perhaps recognizing its error, Sprint released that data today along with its Q3 earnings and saw its stock drop again, losing as much as 11.85 percent before rallying to a 7.04 percent drop by market close.  The reports revealed that the deal with Apple, Inc. (APPL) will cost Sprint $15.5 billion over four years and mean that Sprint most likely won't turn a profit on the device for at least four years.  Sprint will need to raise $7 billion to complete the deal.  Sprint is struggling to keep pace with Verizon Communications, Inc. (VZ) and AT&T, Inc. (T), their two larger competitors who have both already made the jump to their new 4G networks.  On the quarter, Sprint reported losses of $301 million or $0.10 a share, an improvement over last years losses of $911 million or $0.30 a share.  Revenue also posted gain, increasing 2.2 percent to $8.3 billion.

Gains for F5, MetroPCS, and Towerstream

Elsewhere in the tech sector, F5 Networks, Inc. (FFIV) got a boost from strong earnings reports and finished the day up over 14 percent.  F5's $1.06 EPS excluding one-time items was well above the $0.98 forecast by analysts.  MKM Partners analyst Michael Genovese moved the stock from neutral to buy, stating that he became "more constructive" about the company due to improved results in the telecom and federal government business operations.  MetroPCS (PCS) showed strong gains today, finishing up 6.48 percent, while  Towerstream Corporation (TWER), a commercial broadband service provider, finished the day up 7.12 percent.

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Companies

Symbol Name Price Change % Volume
AAPL Apple Inc. 113.05 0.87 0.78 36,379,106
FFIV F5 Networks Inc. 124.64 1.24 1.00 438,930
S Sprint Corporation 6.63 -0.03 -0.45 14,655,332
T AT&T Inc. 40.61 -0.12 -0.29 19,381,624
TWER Towerstream Corporation 1.35 0.17 14.41 872,672
VZ Verizon Communications Inc. 51.98 -0.14 -0.27 13,077,552

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