Is Clearwire worth $4 billion?

y20080y2008001.gifToday should be a red-letter day for all tech-IPO aspirants, for today Wall Street proved that a loss making company can go public, raise over half-a-billion dollars in public market funds, and then get a market capitalization of over $4 billion.

No, this is not an old post being reposted, but instead it is about Clearwire’s (CLWR) initial public offering that added another $1.4 billion to telecom billionaire Craig McCaw’s already bulging pockets. Merrill Lynch, JP Morgan and Morgan Stanley underwrote Clearwire’s offering.

The company sold 24 million shares at $25 a share – or about $600 million in total. Nearly half of that money is actually going to AT&T that recently sold spectrum to Clearwire.

For those of you kids who don’t know Craig McCaw, here is a little refresher. The 57-year-old telecom maverick is 365th richest man in the world, according Forbes’ Billionaires’ List and in the past has started McCaw Cellular (sold to AT&T) and Nextel (Sold to Sprint.) Of course he has had his share of flops as well. The $1.4 billion is going to nicely pad his $2.1 billion net worth.

One of the reasons why the company is getting so much traction is because it is offering the ultra-trendy WiMAX service. It is viewed as the third option against Cable and DSL as a broadband pipe. I wouldn’t call their current service as broadband, but Kevin Martin, FCC Chairman would.

It is one of riskiest investments out there, but then I said the same thing about some of the telecom players from the last boom. I still think this is the biggest built-to-flip company since it will be years before it makes any money. The reason someone would want them is because they own spectrum.

As an ongoing concern, it is going to be a while before its more sensible investors can exhale, and that is why I think Kirkland, Washington-based company’s public market debut is quite a staggering feat: the company lost $284 million on revenues of $100 million in 2006. And that its current customer base is about 205,000 strong: 184,400 U.S. subscribers and 21,800 international subscribers.

Started by McCaw in October 2003, the company has generated sales of about $148 million and in the process has managed to lose about $456 million. In 2004 the company generated about $243,000 in revenues, or about $69 per subscriber (3,500 subscribers). In 2005, sales jumped to $135 per subscriber (62.3 K subscribers) and in 2006 that number is about $484 per subscriber (205K subscribers). Losses per subscriber have decreased from $9940 in 2004 to $2246 in 2005 to $1377 for 2006.

Even though the company seems to be moving in the right direction, it will be a while before it can actually get to the business of making money. Those losses are not scientific because they include the profits (or loss) from the equipment business that was flipped to Motorola recently.

Photo courtesy of via the Mike Milken gallery