Will Clearwire drown in a river of red?

Shares plummet after company reports Q3 losses, warns that it needs more cash

Even the promise of layoffs -- usually a big hit on Wall Street -- hasn't helped wireless service provider Clearwire overcome the impact of widening losses reported Thursday for its fiscal third quarter, never mind doubts about its ability to continue operations. Clearwire shares (NASDAQ: CLWR) plummeted 16 percent from the opening bell Friday, to 6.02 from Thursday's close of 7.17. By late Friday shares had crawled back to 6.86, still down 4.3 percent.

The company announced Q3 results after Thursday's close, reporting a net loss of $139.4 million, or 58 cents a share, compared to a loss in last year's third quarter of $82.4 million, or 42 cents a shares. Revenue for Q3 was $147 million, a gain of 114 percent from last year's $68.8 million. Consensus estimates called for a loss of 61 cents a share and revenue of $157.9 million. But even with a more than 400 percent increase in subscribers from last year's third quarter to 2.84 million and impressive revenue growth, Clearwire, which is spending heavily to build out a high-speed wireless Wimax network, is running out of money. To cut costs, Clearwire is laying off 15 percent of its 4,200 employees, as well as delaying entry into some U.S. markets. Plans for a Clearwire-branded smartphone also have been put on hold. In a statement filed with the Securities and Exchange Commission on Thursday, Clearwire said, “Our expected continued losses from operations and the uncertainty about our ability to obtain sufficient additional capital raises substantial doubt about our ability to continue as a going concern.” Cost-cutting, however, won't sustain Clearwire past the middle of next year unless it gets a new influx of cash, based on comments from CFO Eric Prusch in a Thursday conference call. Sprint Nextel owns 54 percent of Clearwire, but hasn't indicated if it's willing to inject more cash into the company. Clearwire reportedly is considering selling wireless spectrum it owns, as well as debt. With the biggest stake in Clearwire, Sprint Nextel is under a lot of pressure to prevent a disaster. If Clearwire can't raise enough funds through other means, Sprint's going to have to do something.

Chris Nerney writes about the business side of technology market strategies and trends, legal issues, leadership changes, mergers, venture capital, IPOs and technology stocks. Follow him on Twitter @ChrisNerney.

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