Sprint (S) Lower On Cash Crunch At Quasi-Subsidiary Clearwire (CLWR)
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Shares Sprint (NYSE: S) are trading lower today on cash crunch fears at Clearwire (Nasdaq: CLWR).
Sprint describes the relationship with Clearwire in their 10-Q filing, which states:
"We own a 54% economic interest in Clearwire as of September 30, 2010. As a result, Clearwire could be considered a subsidiary under certain agreements relating to our indebtedness. Whether Clearwire could be considered a subsidiary under our debt agreements is subject to interpretation. If viewed as a subsidiary, certain actions or defaults by Clearwire would result in a potential breach of covenants, including potential cross-default provisions, under certain agreements relating to our indebtedness, which could have a material adverse effect on our business, financial condition, liquidity and results of operations." Sprint continued that certain steps could be taken which would "...eliminate the potential for Clearwire to be considered a subsidiary..."
Clearwire, meanwhile, said in their 10-Q, "Our expected continued losses from operations and the uncertainty about our ability to obtain sufficient additional capital raise substantial doubt about our ability to continue as a going concern."
The statement comes following Clearwire's third quarter earnings release, which reported a loss of $0.58 on revs of $147 million, mixed to the consensus loss of $0.61 and revs of $158.44 million. Shares of the company were also downgraded by Kaufman
Bros.,
Capital, and
Wright today.
To conserve cash, Clearwire also announced that they were reducing sales and marketing spending, suspension of additional retail channel market launches of their CLEAR-branded ops in certain areas, a delay to the launch of CLEAR-branded smartphones, a reduction of contractors, discontinuation of development at sites not in the build plan, and a 15% reduction in the overall number of employees. Cost savings from these initiatives are expected to save $100 to $200 million in FY10 and FY11.
Cash savings for Clearwire wasn't helped by a 148% increase in cost of goods for the quarter, due in part to tower lease and backhaul expenses tied to 4G launches.
Shares of Sprint are 2.3% lower this afternoon, while Clearwire is trading 10.6% lower.
Sprint describes the relationship with Clearwire in their 10-Q filing, which states:
"We own a 54% economic interest in Clearwire as of September 30, 2010. As a result, Clearwire could be considered a subsidiary under certain agreements relating to our indebtedness. Whether Clearwire could be considered a subsidiary under our debt agreements is subject to interpretation. If viewed as a subsidiary, certain actions or defaults by Clearwire would result in a potential breach of covenants, including potential cross-default provisions, under certain agreements relating to our indebtedness, which could have a material adverse effect on our business, financial condition, liquidity and results of operations." Sprint continued that certain steps could be taken which would "...eliminate the potential for Clearwire to be considered a subsidiary..."
Clearwire, meanwhile, said in their 10-Q, "Our expected continued losses from operations and the uncertainty about our ability to obtain sufficient additional capital raise substantial doubt about our ability to continue as a going concern."
The statement comes following Clearwire's third quarter earnings release, which reported a loss of $0.58 on revs of $147 million, mixed to the consensus loss of $0.61 and revs of $158.44 million. Shares of the company were also downgraded by Kaufman
Bros.,
Capital, and
Wright today.
To conserve cash, Clearwire also announced that they were reducing sales and marketing spending, suspension of additional retail channel market launches of their CLEAR-branded ops in certain areas, a delay to the launch of CLEAR-branded smartphones, a reduction of contractors, discontinuation of development at sites not in the build plan, and a 15% reduction in the overall number of employees. Cost savings from these initiatives are expected to save $100 to $200 million in FY10 and FY11.
Cash savings for Clearwire wasn't helped by a 148% increase in cost of goods for the quarter, due in part to tower lease and backhaul expenses tied to 4G launches.
Shares of Sprint are 2.3% lower this afternoon, while Clearwire is trading 10.6% lower.
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