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Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

November 4, 2010 at 1:38 PM

Clearwire crunch: Huge layoffs, cost cuts

Kirkland-based Clearwire’s need for more capital has become critical.

In its earnings announcement today, the company said it’s drastically cutting costs while it tries to resolve the situation with investors. Among the options being discussed are selling assets and “strategic transactions.”

Meanwhile, Clearwire is lopping 15 percent of its employees, or 630 jobs.

Clearwire employs around 700 at its Kirkland headquarters, which could see 105 layoffs if the cuts there are proportional.

It’s also delaying the release of Clear-brand smartphones, halting expansion of its retail network, cutting marketing and suspending expansion into markets including Denver and Miami.

The company employs 4,200 employees and will cut “across all functions and levels,” spokeswoman Susan Johnston said. She noted that after the cuts the company will still employ more than it did at the end of 2009.

“We remain cautiously optimistic about securing funding, but prudence dictates that we implement these temporary cash preservation measures,” she said via email.

Clearwire reported an operating loss of $539.7 million in the quarter that ended Sept. 30, up from its $291.3 million operating loss during the same period last year.

Its “net loss attributable to Clearwire” was $139.4 million or 58 cents per share. Sales were $146.9 million, up 114 percent from $68.8 million a year ago.

It expects to spend $3.2 billion to $3.4 billion this year building out its network and business.

Cost cuts also include a “substantial reduction in the contractor workforce.”

From its announcement:

The Company currently has thousands of sites in various stages of planning and construction beyond its current build plan, and it intends to suspend zoning and permitting in a portion of those sites until such time as additional funding becomes available. These contemplated initiatives are intended to result in potential cost savings of between $100 million to $200 million in 2010 and again in the first half of 2011.

Clearwire’s been hiring like crazy. It employed 3,595 in March, up from 2,015 in March 2009. At that level, the 15 percent layoff would mean about 539 jobs will be cut.

Despite the financing challenge, Chief Executive Bill Morrow talked up the company’s subscriber growth in the earnings release. His opening quote:

“This quarter we saw continued strong demand for the nation’s first 4G mobile broadband service, which drove a record 1.23 million new subscribers for an ending third quarter subscriber base in excess of 2.84 million. Due to this phenomenal growth, we now believe we will end this year in excess of 4 million in total subscribers, nearly doubling our original 2010 expectation of just over 2 million.”

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