SAN FRANCISCO/NEW YORK (Reuters) - Clearwire Corp’s recent “going concern” notice does not mean that Sprint Nextel Corp and its other partners would not continue to fund the company, the head of Sprint said on Tuesday.
Sprint Chief Executive Dan Hesse said the notice was an accounting technicality due to Clearwire having less than 12 months worth of funding left.
Clearwire, which is 54 percent owned by Sprint, said on Thursday there was substantial doubt about its ability to continue as a going concern due to uncertainty over whether it could raise new funds.
“That doesn’t mean that Sprint and other partners won’t continue to fund Clearwire,” Hesse told the audience at the OpenMobile conference here.
However, Hesse did not confirm that his company is actually prepared to provide more funding to Clearwire, which last week announced big cost cuts due to uncertainty over whether it would raise the funding it needs.
Wireless broadband operator Clearwire has said that it hopes to announce a new round of funding by the end of the year. Analysts say they expect Sprint to pour more money into the venture, as it depends on Clearwire for advanced services.
Despite Hesse’s comment, Clearwire shares dropped 22 cents, or 3.4 percent, to $6.31 on Nasdaq Tuesday afternoon. The stock had fallen from $7.17 before Clearwire reported earnings last week.
“I’m not sure if it’s (Hesse’s remark) new to the market, but based on the share price cut Clearwire has had in the last few days it’s clear that investors are placing a lower probability on the potential for Clearwire to raise additional capital,” said Mizuho Securities analyst Michael Nelson.
Nelson added: “At the end of the day they both need each other, so I think they need to get the deal done.”
Reporting by Gabriel Madway and Sinead Carew; Editing by Richard Chang and Gerald E. McCormick