Clearwire to Lay off 15 Percent to Save Cash

WiMax service provider Clearwire will lay off 15 percent of its employees and suspend the opening of retail stores and marketing campaigns in some cities as it tries to conserve cash and raise additional capital.

The company logged a net gain of 1.23 million subscribers in the third quarter, reaching 2.84 million total subscribers, and still expects its network to cover 120 million potential users across the U.S. by the end of this year, it said on Thursday. Revenue rose 114 percent from a year earlier to US$147 million. But Clearwire reported a loss for the quarter of $139 million, or $0.58 per share.

Clearwire is also talking with its major shareholders and third parties about options for raising additional capital to continue expansion of its WiMax network beyond its current build plan. Those could include debt or equity financing, asset sales or "strategic transactions," the company said in a press release on its results. According to published reports, Clearwire has been exploring the sale of some of its vast radio spectrum holdings.

However, the company also announced dramatic steps to conserve its resources in the near term. In cities including Denver and Miami, it will turn on its network before the end of the year but not open retail stores nor advertise its Clear-branded mobile service. Wholesale partners that resell access to the Clearwire network, such as Comcast and majority owner Sprint Nextel, could market the network in those cities themselves if they chose to do so, said Clearwire spokesman Mike DiGioia.

In addition to the 15 percent cut in employees, Clearwire will substantially reduce its contractor workforce. It will also suspend zoning and permitting activities in some markets that it is pursuing beyond its current build plan until additional funding becomes available.

Clearwire also said it would delay the release of its first Clear-branded smartphone.

The company believes these steps could save between $100 million and $200 million this year and again in the first half of 2011.

Clearwire is up against looming competition from Verizon Wireless, which plans to launch an LTE (Long-Term Evolution) network by the end of this year that it says will reach 110 million U.S. residents. AT&T also is planning an LTE launch next year, and T-Mobile USA is rolling out its own high-speed mobile network using HSPA+ (High-Speed Packet Access) technology.

Clearwire's shares on the Nasdaq stock exchange were down $0.30 to $6.87 in after-hours trading Thursday afternoon, following the announcements.

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