Clearwire snags $900 million from Intel, Motorola; drops IPO
Seattle Times technology reporter
Clearwire, the Kirkland company building an expansive wireless broadband network, received more than $900 million in capital Wednesday, enough to cancel plans for a stock market debut.
Intel led the investment by contributing $600 million, the largest amount the chip giant has directed to a single company. Motorola invested $300 million and purchased NextNet Wireless, Clearwire's hardware division, for an undisclosed amount.
The scale of the investment is huge on all fronts. The amount easily doubles what Clearwire already has raised in equity and debt since being started by wireless pioneer Craig McCaw in 2003.
It's also more than twice what it had expected to raise in the initial public offering it asked the Securities and Exchange Commission to shelve Wednesday.
But more significant than the money is the partnership of the three companies, said Ben Wolff, who shares Clearwire's chief executive title with McCaw.
Together, the companies will likely have enough money and engineering talent to develop, build and host a mobile high-speed wireless broadband network called WiMax in the U.S. and other countries, he said.
"It's a big number," Wolff said, "but the partnerships are equally important."
The wireless network Clearwire is building competes with DSL, cable and, in some cases, high-speed networks called 3G that cellular carriers are deploying. WiMax is expected to be cheaper than 3G because it uses airwaves more efficiently and requires less equipment during installation.
Clearwire, which has 870 employees, has rolled out service in 27 markets and plans to launch soon in a variety of cities, including Everett, Seattle and Tacoma.
With Wednesday's announcement, Intel, Motorola and Clearwire are aligning themselves with the so-called WiMax standard.
WiMax has been highly promoted as a next-generation network, but backers have been criticized for overpromising its capabilities.
With the three companies backing WiMax, the standard will likely achieve the large commercial deployments it had been planning on.
Also, by using standardized equipment, Clearwire's cost of building its network may drop.
Under the partnership, Intel would build chips for WiMax in laptops, Motorola would build the infrastructure and Clearwire would upgrade the networks it already owns and deploy the service more broadly.
Intel said it plans to put chips in laptops by the end of 2007; Motorola said it plans to start building mobile WiMax networks by the second half of next year.
In addition, the companies said they will work on both the fixed version of the WiMax-like service Clearwire offers now and the evolving mobile version.
The fixed version requires a modem about the size of a textbook, while the mobile WiMax will be integrated into laptops and allow a user to roam.
"This is a great opportunity to hasten the deployment of WiMax and for us to have the first mover advantage," said Raghu Rau, Motorola's senior vice president of strategy, networks and enterprise business.
Clearwire had hinted it would sell NextNet, its equipment subsidiary, from the time it acquired the Minneapolis company in 2004. It bought NextNet to ensure it would have the products it needed to deploy the service.
"I would say it [equipment] has never been a core competency in a McCaw operation," Wolff said. "Having said that, if we didn't find the right partnership with Motorola, we didn't feel compelled to anything. They were doing well. and it was a beneficial relationship."
McCaw is known in the wireless industry for starting McCaw Cellular Communications, which AT&T bought for $11.5 billion in 1994 and later became AT&T Wireless. McCaw also rescued Nextel Communications by investing about $1.1 billion and turning it into a leading wireless carrier.
But he has had his failures. Teledesic, which was developing a network of satellites to deliver Internet service, went belly up in 2003.
McCaw also held a small fortune in fiber-optics network provider XO Communications, which filed for bankruptcy protection and has since reorganized.
An executive at Intel, which had previously invested in Clearwire, said McCaw will have to obtain much more than the $2 billion-plus it has raised to complete its WiMax network.
"They will need a lot of capital," said Sriram Viswanathan, vice president of Intel Capital, the company's venture-investing arm. "To build a nationwide network, you need billions of dollars of capital. You will see them have a voracious appetite for capital."
Tricia Duryee: 206-464-3283 or email@example.com
Copyright © 2006 The Seattle Times Company