We continue to see the spectrum owned by Clearwire Corporation (CLWR) as very valuable. Our thesis has been that mobile devices will continue to proliferate requiring more and more spectrum. Sooner or later, a bigger firm requiring spectrum will turn to Clearwire.
Sprint (S) owns 54% of Clearwire. Sprint relies on Clearwire for its 4G network. Clearwire uses a technology called Wimax for 4G.
Apple (AAPL) is supporting a competing technology called LTE. Clearwire has announced that it will build an LTE network. It is not clear where Clearwire will get the money to build LTE network.
For the first time Sprint is now carrying Apple iPhone. Sprint has made a $20 billion commitment to buy from Apple. As part of Sprint’s deal with Apple or as a consequence of the deal, Sprint now has to shift to LTE from Wimax.
Sprint has announced that it will no longer sell Clearwire products after 2012 and will build its own LTE network. It is not clear if this network will be in parallel to the efforts to build an LTE network at Clearwire.
In an email Clearwire states that Sprint is still dependant on CLWR for 4G.
Long and short of this development is that Clearwire is a sacrificial lamb for Sprint to get iPhone.
This development does not reduce the value of the spectrum owned by CLWR in the very long-term, provided CLWR can hang in until someone desperatelywants to buy spectrum. With Sprint not supporting Wimax in the future and uncertain prospects for financing of CLWR LTE network, the risk in the short-term has gone up.
We encourage subscribers to carefully look at the risk reward matrix in the All Around Alert. With this development, the potential reward has not changed, but the risk should be viewed on the risk reward matrix by moving CLWR about one-half inch to the right. This will put CLWR right at the boundary of the CUT ZONE from a risk reward perspective.
It is not prudent to add at this point, however, aggressive investors may review adding to the present position if the slide continues. Aggressive investors may continue to hold the present position for the very long-term.
Conservative investors may consider trimming the position on any big bounces.
Another way to look at it is that the potential gain is about 700% of the potential loss.
If and when six screens of the ZYX Change Method are satisfied, we will issue a buy signal on the Real Time Feed of the ZYX Buy Change Alert.
