$600 million raised in Clearwire debut

In one of the most anticipated initial public offerings in years, Kirkland-based Clearwire raised $600 million Wednesday, making it the second-largest IPO in Washington state's history.

The funds will go toward its effort to build a nationwide wireless broadband network based on a technology called WiMax. For the most part, the network competes with DSL or cable broadband providers, but because it can be mobile, it has the promise of developing a platform for new applications for Internet connections.

In its IPO, Clearwire sold 24 million shares for $25 apiece, reaching the high end of the expected range of $23 to $25. The company also exceeded expectations that it would sell 20 million shares, with an overallotment of 3 million. The stock began trading today on the Nasdaq under the ticker symbol CLWR.

Clearwire shares shot up nearly $3 to $27.95 in early trading today but gave up all those gains, and more ­­-- ending their first day of trading down 38 cents at $24.62.

In recent weeks, investors have paid a lot of attention to Clearwire. Most of the buzz stems from the company's roots: The founder is Craig McCaw, a wireless entrepreneur who has built successful and market-changing companies.

McCaw founded McCaw Cellular Communications, which he sold to AT&T for $11.5 billion in 1994. As AT&T Wireless, the Redmond company went public in April 2000, raising $10.6 billion and still holding the honor of being the largest IPO in U.S. and state history.

Building a network


BIG BUSINESS In less than four years, Clearwire has secured billions in financing for its wireless broadband network.

2004

March: Acquires NextNet Wireless, which develops and sells broadband wireless network equipment.

August: Launches service in first market, Jacksonville, Fla.

2005

March: Sells $100 million in stock to Bell Canada.

August: Sells $260.3 million in senior notes.

October: Partners with Best Buy to sell service in Best Buy stores.

2006

February: Sells $360.4 million in senior secured notes.

April: Starts offering voice over Internet Protocol phone service in some markets.

May: Files plans for a $400 million initial public offering. Partners with Time Warner to sell service with AOL.

August: Sells NextNet to Motorola for $47.1 million. Drops plans for IPO. Raises $600 million from Intel, $300 from Motorola and $155 million from other investors. Borrows $125 million.

October: Says it has 162,000 subscribers.

November: Launches service in Seattle, it's 32nd market and largest service territory yet.

December: Refiles for public offering; says it has 184,000 subscribers in 34 U.S. markets.

2007

February: Pays $300 million for spectrum from BellSouth.

Wednesday: Goes public, selling 24 million shares at $25 a share, raises $600 million.

Source: Clearwire

Until recently, McCaw shared the title of chief executive with Ben Wolff, but now holds the position of chairman. Perry Satterlee is the president and chief operating officer. He also serves as the CEO of Clearwire's U.S. operations.

Having only launched its first market in 2004, Clearwire is in its early days. That makes the IPO an opportunity and a risk.

It has rolled out service in 34 U.S. markets and in Belgium and Ireland. It has 207,200 subscribers, including 184,400 in the U.S. By the end of this year, it expects areas with the service to cover up to 16 million people.

To fuel this growth, the company will need a lot of cash. Before the offering, it had raised about $2 billion. Two of its largest investors — and now shareholders — are Intel and Motorola, which are helping Clearwire by developing WiMax equipment.

The proceeds of the IPO are expected to go toward expanding the network and general corporate purposes, the company said in documents filed with the Securities and Exchange Commission.

Building a U.S. and international wireless broadband network is expensive. To launch in a market, the company acquires rights to hard-to-get airwaves, builds an antenna network and opens retail stores. It also pays for advertising.

The company warns in SEC documents that in 2007 alone it will need more than $800 million in cash and that it will require "substantial additional capital in the long-term to fund our business and our success and viability will depend on our ability to raise additional capital."

The company lost $284.2 million last year on revenues of $100.2 million. And a large percentage of those revenues came from its equipment division, which it sold to Motorola in August.

Competitively, the pressure is on. In August, Sprint Nextel committed to rolling out a nationwide WiMax network, making it potentially a direct rival with vast resources.

Still, Clearwire maintains it is pursuing a big opportunity.

The U.S. residential broadband market is expected to grow 14.3 percent annually from 2006 to 2010, according to IDC, a research firm. In addition, Clearwire contends that demand for e-mail and other applications associated with laptops and other mobile devices will lead subscribers to favor portable Internet access.

With Clearwire service today, subscribers can carry a book-size modem to connect to the Internet. The service is expected to be completely mobile once it officially starts installing certified WiMax equipment, coming shortly.

The public offering will also benefit the largest shareholders.

Forbes listed McCaw as the 153rd-richest person in the U.S. last year, with an estimated wealth of $2.1 billion. With the addition of Clearwire's IPO, McCaw (mostly through Eagle River Holdings, his personal investment company) will be $946.4 million richer — at least on paper. Intel's stake will be worth $919 million, and Motorola will own $416.7 million.

Despite Clearwire's need to raise capital, McCaw intends to hold a tight grip on the company.

After the public offering, control will remain in the hands of both McCaw and Intel as a result of a two-class stock structure in which they hold shares worth 10 times the voting clout of the shares sold to outside investors. McCaw's shares will account for about 49 percent of the voting rights, while Intel holds 30 percent.

Tricia Duryee: 206-464-3283 or tduryee@seattletimes.com