Clearwire’s restructuring took a radical turn this morning when the Kirkland wireless company announced that it’s handing off engineering and support of its 4G network to Ericsson.
About 700 Clearwire employees will shift to Ericsson, which is taking over network engineering, operations and maintenance for at least the next seven years.
Clearwire still owns the network and will continue to handle relationships with consumers and business customers. The 700 employees are expected to start work at Ericsson soon, before “mid-year 2011.”
“We’re positioning this company to be able to be profitable and generate cash flow we’re going to be able to reinvest back into the network,” said Erik Prusch, Clearwire’s chief operating officer.
Clearwire stock jumped about 5 percent on the news, to around $4.50 as of 10 a.m.
It’s the second major reduction in employment at Clearwire in the last six months. Facing a cash crunch, the company in November laid off 630 and halted expansion of its retail network and growth into some new markets.
At the time it had 4,200 employees nationally and about 700 locally. As of April 1, it had 3,300 nationally and about 550 locally, of which about 100 will transfer to Ericsson.
With the Ericsson deal, the company’s following the path of its corporate parent Sprint, which also offloaded network engineering and support to the Swedish telecommunications company.
Ericsson now works for Sprint in Redmond and has an office in Bellevue, but for the time being the Clearwire employees will continue working at its Bellevue office.
Prusch said the employees should receive benefits comparable to what they received at Clearwire.
“They’re permanent employees, it is a long-term contract with Ericsson,” he said. “One of our chief concerns was being able to continue to have the relationship with these employees.”
“We really view this thing as a win-win which allows them continuity of employment, good or better benefits, or the same or better benefits than they’ve got, and most importantly retention of their institutional knowledge (and) the their ability to make an impact on our network.”
Ericsson spokeswoman Kathy Egan said all 700 employees will be hired and will receive “comparable” benefits. They are spread across the country with the largest pockets in the Seattle area and Las Vegas, which also has about 100.
“I can tell you that everyone is coming over,” she said. “We greatly value their WiMax expertise and we are very much looking forward to welcoming them to Ericsson.”
Seniority will also transfer, she said: “Seniority will all be honored so the time that they had at Clearwire will transfer over with them to Ericsson.”
As for employment beyond the seven-year contract with Clearwire, she said “I don’t know that, I can’t speculate beyond seven years.”
Asked if the pruning positions Clearwire for a sale or merger, Prusch said he sees it doing the opposite, setting the company up to run profitably and fund its expansion with revenue.
“This is the next step in that evolutionary process, which is to make certain we’re doing best practices across the business,” he said.
Clearwire’s expecting to be profitable within the next year to 18 months. Prusch wouldn’t say how much the Ericsson deal changes that target but more details should be disclosed with the company’s next earnings.