With shares of Clearwire Communications (NASDAQ:CLWR) trading at around $3.37, is CLWR an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
Sprint (NYSE:S) has made a bid for Clearwire. The bid is for $2.90 cents per share, or $2.1 billion. Sprint was already in for $1.9 billion, and they’re attempting to position themselves accordingly based on the huge move in mobile.
Sprint is in wheeling and dealing mode right now. They have also expressed in interest in a partnership with Dish Network Corporation (NASDAQ:DISH) for mobile services over Dish’s network (strange wording that couldn’t be avoided here.) The point is that Sprint is on the move in an effort to be more competitive with AT&T (NYSE:T) and Sprint.
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A lot of people feel that Clearwire needs to take Sprint’s offer because no one else will be interested. While that might be true, it’s not a certainty. What’s perhaps more important is to realize that Sprint might need Clearwire just as badly as Clearwire needs Sprint. The question is whether there will be a higher bid or not.
Past partners in Clearwire haven’t seen much success. This includes Google (NASDAQ:GOOG) and Time Warner Cable (NYSE:TWC). They both bailed from failed deals. Sprint’s partnership with Clearwire has also been a failure up until this point. The goal was to build a network that could compete with AT&T and Verizon. This was unsuccessful. Clearwire’s WiMax still has some potential, but AT&T and Verizon are using more advanced LTE.
Regardless of past failures, some analysts feel that Sprint could end up bidding as high as $5 for Clearwire. Though possible, that seems like a bit of a stretch. Keep in mind that Clearwire traded below $1 earlier this year. Greed has a habit of bringing pain.
Let’s take a look at what Sprint will get if any deal is finalized. In many ways, it looks more like coal in a stocking than a brand new train set.