Towerstream, riding the Clearwire coattails

The buzz around Craig McCaw’s Clearwire and WiMAX has been the kind of boost tiny Towerstream has been looking for. It had been selling fixed wireless services to businesses for a while and had made a nice living following the time tested business philosophy of organic growth. (Read: Last Mover Advantage) Of course, that meant not many paid much attention to them, and turning a profit was hard.

With Clearwire IPO, atleast one part of the equation changed. The company which listed itself on the OTC (over-the-counter) stock markets by doing a reverse merger with University Girls Calendar Ltd, has benefitted from the WiMAX hype.

It quickly graduated to the NASDAQ stock exchange and their stock climbed to about $5.5 a share. The company is now planning to sell ten million shares at $4 a pop. The plan is to use the money to grow in target markets, though unlike Clearwire, Towerstream is firmly focused on business customers.

The expansion into new markets is coming at a price. The company took on $3.5 million in debt, and spent heavily to buyout Speakeasy’s WiMAX business in Seattle. Towerstream lost $1.64 million in the first quarter of 2007, which is close to the total losses for 2005 and 2006 put together. The revenues were $1.5 million in the quarter, essentially flat with the same quarter in 2006. And that is with expansion into new markets. “We cannot anticipate when, if ever, our operations will become profitable,” they say. Okay, we appreciate the honesty.

Of course, that money losing trait is something Towerstream shares with Clearwire, which this morning announced that it is launching its service in Richmond, Virginia.