VentureBeat

Updated

Well, TechCrunch’s Erick Schonfeld certainly isn’t pulling his punches. Last week, while most reporters (including me) were writing enthusiastically about the new partnership between Sprint and Clearwire to build a mobile wireless network using WiMax technology, Schonfeld slammed the deal as “a disaster waiting to happen.” Then he followed up on Friday with even more reasons why the deal is a bad idea.

So did I jump the gun? Was I (along with Eric Schmidt, chief executive at Google, which invested in the deal), “snookered”? I’m not convinced, nor were a couple wireless experts VentureBeat spoke to. Schonfeld certainly does a compelling and thorough job of outlining the many risks and unknowns involved in the deal, but he may be missing the bigger picture: Despite the risks, the deal is a calculated gamble that could pay off.

Schonfeld’s biggest argument is that WiMax has until now been a “fixed” wireless technology (in other words, it provides wireless service in your home and office), rather than mobile, and it hasn’t proven itself as a workable business in that field, either. For example, Clearwire’s network will be the heart of the new partnership, yet Clearwire lost $727 million last year. Also, in order to work, WiMax chips must be installed on laptops and cell phones, which hasn’t happened much yet.

These are all fair points, but I’d argue that collectively they mean the fate of the partnership is unclear, not that it’s a guaranteed failure. For one thing, it’s a mistake to assume that Clearwire and WiMax’s history are good predictors for how this new company (which will also be called Clearwire) will perform. After all, the deal brings plenty of new players — such as Google, Intel Capital, Comcast and Time Warner, who are all investors — into the mix, not to mention $3.2 billion of fresh funding.

“[Schonfeld is] assuming that Clearwire’s current model will be the one going forward, which is highly unlikely,” says Paul Grim of SunBridge Partners. “The name on HQ may be Clearwire, but the $3.2 billion raised suggests the other parties may have a say in how things play out.”

It’s also worth noting that WiMax may be relatively unproven, but the new company will still be deploying ahead of the competing LTE technology, which is a smart move. As Intel Capital’s Arvind Sodhani told us, “We can’t wait three years.” (Keep in mind that Sodhani has a horse in the race, since Intel is a leading provider of WiMax chips.)

Finally, as Rich Wong of Accel Partners told us, the investment makes sense as a calculated gamble as part of Google’s efforts to ensure open mobile networks.

“Consider that one of their alternatives would have been to try and build a complete network off of 700 Mhz spectrum,” Wong said. “This is a far more cost-effective way of driving to this form of open standard.”

So, yes, that’s a lot of money to pour into an unproven technology. But there are plenty of reasons to be excited too, and I’ll wait for more warning signs before joining in TechCrunch’s doom and gloom.

Update: It’s worth noting that Clearwire (the old Clearwire, not the new company that will be formed by the partnership) stock has been rising for most of today (May 13) — as of 1pm Pacific, it’s up around 5 percent from the opening price of $12.81. Now, there may have been some other Clearwire-related news yesterday (like, say, the release of decent Q1 financial data), but until someone can prove otherwise, I’m taking full credit. [Image from Marketwatch]

Intel Capital chief Arvind Sodhani talked with VentureBeat today about why the world’s largest chip maker participated as an investor in the $12 billion Clearwire-Sprint deal. Intel, along with Google, Comcast, Time Warner Cable and Bright House Networks invested a combined $3.2 billion into the new company. Intel’s share of that was $1 billion, which is no surprise since Intel has been the biggest proponent of WiMax, the long-range wireless Internet technology that the combined company will deploy. He talked about WiMax and Intel Capital’s own latest moves.
VB: Can you discuss the logic of participating in this deal?

AS: WiMax is crucial for our strategy. We want to facilitate the deployment by providing capital. That’s what Intel Capital does. WiMax is here. It’s happening. It’s two to three years ahead of any competing technology. It’s getting deployed. It’s cheaper and faster. It’s getting embedded into our Montevina platform and will be in laptops in the coming quarters.

VB: By making a big bet in this, you seem to be saying that WiMax will beat the alternatives. Is that correct?

AS: What other options are there?

VB: LTE (long-term evolution, the next-generation cell phone data technology).

AS: LTE is a good two or three years behind. There is nothing there. We can’t wait three years.

VB: And WiMax is a better technology?

AS: It’s the fastest technology. If and when [LTE] comes out, it will have similar speeds to what WiMax has today and WiMax will have moved on to the next generation by that time. If you want a high-speed wireless connection to your laptop in the near future, there are not that many options. That’s why we are pushing the technology because we want connectivity to laptops and the forthcoming mobile Internet devices. Read the rest of this entry »

Sprint and Clearwire have confirmed yesterday’s reports that they’re teaming up to create a new wireless broadband company. The new company, which will also be called Clearwire, should be the first to create a national mobile network using Intel’s WiMax technology, delivering broadband Internet at a much higher speed than existing 3G networks.

Intel, Google, Comcast, Time Warner and cable company Bright House Networks will invest $3.2 billion in this new company, while wireless veteran John Stanton’s Trilogy Equity Partners will invest directly in the new Clearwire’s common stock, which has a target price of $20 per share. Sprint will own 51 percent of the new Clearwire, existing Clearwire shareholders will own 27 percent and the strategic investors will collectively own 22 percent.

As we wrote yesterday, this looks to be a big win for all companies involved — particularly Sprint, which has been struggling, and WiMax, which is competing with rival technology LTE. (Others, however, argue that the situation risks becoming a “too many cooks in the kitchen” fiasco.)

The new Clearwire plans to cover between 120 and 140 million customers in its network by 2010.

The announcement includes a bunch of related partnerships between Sprint, Clearwire and the strategic investors. Google, for example, will work with Clearwire to develop Internet services, and Google applications like Google Maps and Gmail will now come preloaded on Sprint devices. Comcast, Time Warner and Bright House have made wholesale agreements with Sprint and Clearwire, and the two companies have also struck wholesale deals with each other.

Google Product Manager Larry Alder says his company invested $500 million, and he touts the deal’s potential for more open network policies, such as an open Internet protocol for mobile broadband devices.

Here’s the latest action:

Sprint and Clearwire to join forces for WiMax venture – The telecom companies, along with Comcast, Time Warner, Google and Intel, are about to announce a $3.2 billion investment in a new wireless Internet company using WiMax technology, according to the Wall Street Journal. The Journal reports that the new company, which will also be called Clearwire, is valued at more than $12 billion. It will launch two years ahead of competing offerings from AT&T and Verizon. The combination of that head start and the formidable lineup of backers should make this quite a coup for Sprint, which is the driving force behind the partnership.

The result: Everyone wins. The Wimax camp needed some help to counter a competing technology LTE, Clearwire needed some money and the carriers get to split up the financing burden among themselves. Google’s role, though, is new. It’s just the latest move by the Internet search giant to push into the wireless communications arena, and comes as it is pushing it new mobile platform, Android.

USA Today reports that Trilogy Equity Partners also put $10 million towards the venture. Trilogy is a VC firm started by John Stanton, who helped found McCaw’s first wireless venture.

Sun previews app platform JavaFX – Sun’s software chief Rich Green gave a demonstration of JavaFX, which should compete with platforms like Adobe AIR for developers of hybrid web-desktop applications, at the JavaOne conference today. Green showed off a JavaFX application that runs Flickr and Twitter feeds in Facebook, then dragged the app onto the desktop. The same application ran on a Java-enabled phone. Rather inauspiciously, CNET reports that the application kept breaking, although the problems were blamed on the venue. The platform is set to launch this fall; I’m hoping more details will emerge about how it’s going to stand out against AIR.

Rocker Neil Young makes collected works available for download — Speaking of Sun, famed musician Neil Young is partnering with the company in an ambitious project to make all of his work available for purchase. Apparently, the content will be delivered on Blu-ray discs that check for and download new content as it becomes available. Young says the Playstation 3 is the best device for downloading all that music. This sounds very cool, although I’m not sure that it’ll lead to quite as many PS3 sales as the new Grand Theft Auto game.

Microsoft’s media player Zune gets TV shows – For all you Zune owners who have been jealously eyeing those with iPods and wondering, “When will I be able to watch Battlestar Galactica on a tiny, portable screen?” the long nightmare is over.

Cisco revenue up 10 percent in Q3 – That’s an increase from $8.9 billion to $9.8 billion. Since the company, which is the largest maker of networking equipment, is seen as a bellwether for the larger tech industry, that’s a bit of a relief, and particularly impressive after Sun recently reported a loss during the same period and blamed the weakening economy. Cisco’s profit, on the other hand, fell due to acquisition-related charges, and sales are expected to grow more slowly than previously anticipated.

Stephen Colbert is the Person of the Year (on the Internet) — The political comedian will be recognized as part of the 12th Annual Webby Awards next month. Colbert’s mockery of Internet trends has led to everything from Wikipedia vandalism to possibly the largest Facebook group in history. Which is enough to make him an online pioneer, at least in the eyes of the International Academy of Digital Arts and Sciences.

Here’s the latest action (updated):

Struggling cell phone manufacturer Motorola announced it would split itself into two different companies. Under pressure from activist investor Carl Icahn, the company will divide itself into a cell phone company and a company with broadband and mobility equipment operations. The latter firm would create infrastructure equipment for wireless networks as well as build television set-top boxes. The company had said in January that it would consider a breakup, mainly since its stock has plunged in the past year amid loss of cell phone market share to Nokia, Samsung and Apple.

Comcast and Time Warner are talking about a joint venture in WiMax wireless Internet technology. The Wall Street Journal reported that the cable operators would diversify their business by setting up a WiMax company operated by Sprint Nextel and Clearwire. Under the plan, Comcast would invest as much as $1 billion in the venture while Time Warner Cable would contribute $500 million. Bright House Networks, the sixth-largest cable operator, would contribute $100 million. Gigaom called it the $3 billion WiMax Rescue Act. They’re plowing forward in spite of questions about the technology, including a failed trial in Australia.

Take-Two formally rejected an offer from Electronic Arts. As expected, the beseiged video game maker rejected EA’s $26 a share, or $2 billion, tender offer. Take-Two, the maker of the upcoming game Grand Theft Auto IV arriving in stores April 29, also amended its proxy statement to adopt anti-takeover measures such as a stockholder rights plan.That sets the stage for a grueling battle with EA, which could nominate its own slate for Take-Two’s board.

Yahoo! joins Open Social Alliance led by Google. The Internet company said that the move will make it easier for programmers to write software that can run on the pages of many social networks and other web sites. Meanwhile, David Morin, senior platform manager at Facebook, reiterated at the Snap Summit 2.0 conference that his company isn’t joining Open Social now but isn’t against it in principle. Google said Tuesday it would give up control over the alliance and turn it over to the nonprofit OpenSocial Foundation.

Facebook confirmed it lured away another Google executive. Ethan Beard, former director of social media at Google, will join Facebook. He’s the second high-profile executive to leave Google this month. Facebook now has more than 500 employees.

$19 billion deal to privitize Clear Channel Communications nears collapse. The Wall Street Journal reported that the private equity deal is a victim of the credit market crunch. The leveraged buyout apparently is imploding as private equity firms and banks failed to work out differences over financing terms.

Imeem, the playlist company, opens up its platform — The company has opened to third-party developers, giving them tools to integrate their applications into Imeem. Imeem says calls itself the third largest social network, with more than 24 million unique visitors a month, though its users are mostly checking out each other’s music, and its not considered by most to be a full-fledged social network. The API lets developers access its users’ music tracks, which is a powerful thing because Imeem lets users run complete tracks for free (it got rights to do this from labels, after Imeem said it wanted to try an ad-based model). Developers can also access any videos and photos on imeem, access the social graph of users, modify the metadata for the content and customize the imeem video player.

1) Rumor: Google to buy Sprint?
2) The U.S. House of Representatives passes VC tax
3) Berkeley Bionics brings exoskeletons to market
4) Fox Interactive Media may start its own ad network
5) Railpower Technologies to steam on, for now
6) Zuckerberg, speaking grandly
7) Are Facebook’s ads illegal in New York?
8) Murdoch calls Facebook a phonebook
9) Sprint and WiMax startup Clearwire have ended plans to form a joint venture

Rumor: Google to buy Sprint? – The rumor surfaced yesterday, here, suggesting that despite a number of major issues, owning a carrier would give Google crucial control over developing and distributing its own mobile services. The issues, however, are numerous. Google would have to beef up its governmental lobby arm to compete against AT&T and other carriers for favorable regulations. It would also have to manage retail stores for mobile customers (expensive, although they’ve worked for Apple!). The move might also send the message to AT&T and the others considering the Open Handset Alliance that Google is actually going to compete directly against them, regardless of the Open Handset Alliance that Google is spearheading. Om has more about how this move could make sense for Google, Intel, Cisco and other leading Silicon Valley companies.

The U.S. House of Representatives passes VC tax — It will change the carried interest from a capital gains to ordinary income, thereby lifting tax to about 35 percent on VCs and other private equity professionals. It is not expected to pass the Senate, however, and President Bush has suggested he would veto it.

Fred Wilson’s series on the struggling VC industry – Venture capitalist Fred Wilson has a good series of posts about the rise and fall of the VC industry, and explains how the official data VCs report may look better than reality (because poorly performing firms have decided not to report their data, or are shutting down and so can’t report their data), and that even top performing firms in the industry aren’t doing that well. It suggests the VC industry is in for some serious pain.

Berkeley Bionics brings exoskeletons to market – It provides technology to give you extra muscles, and plans to augment human strength in places like the war zone (for military) or other emergency situations (firefighting, and so on). This system provides its pilot with the ability to carry loads up to 150 pounds on his back “with minimal effort” over any type of terrain for extended periods of time without reducing his agility. The company is a spinout from the Berkeley Robotics and Human Engineering Laboratory and is raising funds. Via Alarm:clock.

Zuckerberg, speaking grandly – “There is no opting out of advertising,” Zuckerberg said of Facebook’s new platform last week, “Once every hundred years media changes. The last hundred years have been defined by the mass media. The way to advertise [then] was to get into the mass media and push out your content. That was the last hundred years. In the next hundred years, information won’t be just pushed out to people, it will be shared among the millions of connections people have.” Via TechCrunch.

Fox Interactive Media may start its own ad network – FIM may be planning to begin providing advertisements, as well as living off of them. Company representatives have been making the rounds to gauge the interest of outside media sites in showing ads provided by Fox, according to the Silicon Alley Insider. Of course, FIM may be large enough to create its own ecosystem: The company runs AskMen, Fox.com, Dow Jones, Myspace and several other giant media properties. We’re not sure if it’s connected, but we also recently reported on FIM hiring a consulting company to streamline its ad operations. Maybe the advice was, “Go forth, and build your own.”

Railpower Technologies to steam on, for now – The fires were flickering for Railpower, a maker of hybrid locomotives, but the Ontario Teacher’s Pension Plan decided to step in and keep the engines running. The fund put $35 million into the cleantech train company, noting that it expects that “increasingly stringent environmental regulations in North America and globally will open up new markets” for clean rail startups like Railpower.

Are Facebook’s ads illegal in New York? — That’s what the New York Times is saying, citing a 100-year-old New York State statute which says that “any person whose name, portrait, picture, or voice is used within this state for advertising purposes or for the purposes of trade without the written consent first obtained” can sue for damages.

Murdoch calls Facebook a phonebook –”The two platforms are very different in the user experience,” said Rupert Murdoch, head of News Corp. and owner of MySpace, the competitor to Facebook. “MySpace is a place for self-expression, where users’ MySpace pages become their home on the Internet. It is where they discover people, content, and culture — where they share information, communicate, and consume. Facebook, on the other hand, tends to be a web utility, similar to a phonebook.” Via ZDNet.

Sprint and WiMax startup Clearwire have ended plans to form a joint venture — WSJ has details.

Broadband router company BigBand went public today, and its stock rose 33 percent on its first day of trading, which everyone said was a good thing.

Scott Sweet, managing director of IPOBoutique.com said it was “particularly impressive.”

But it means the company could have sold its shares at a price say, 25 percent higher — and still have given public investors a decent pop of a few percentage points in reward for buying the new stock. In other words, Bigband loses because it could have pocketed at least $35 million more. The investment bankers taking BigBand public priced it too low.

Or at least, so it seems now. You never know. The investment banks screwed up the IPO of WiMax company Clearwire last week, taking that company public at a price that was too high — either that, or bankers and their clients didn’t buy enough stock to support it in the early hours after the IPO.

We should bring back the Dutch Auction, the method of IPO where shares are bid on beforehand so the market demand is assessed, vastly diminishing the risk of volatility after the IPO. That’s the process Google used (see story at the time), and while Google’s IPO saw some rocky stages early on, they weren’t a result of the Dutch Auction procedure per se.

Here’s the latest action:

March Madness alerts — Palo Alto mobile search company 4INFO will send you an alert in the final minutes of any of NCAA March Madness game that looks like it could be an upset. It sends final scores too. To sign up, text TOURNEY ALERTS to 44636, or signup at the company’s site.

Coffee-house entrepreneurs — The SF Chronicle has a piece about the SF entrepreneurs who launch companies at coffee houses, exploiting the WiFi connections at places like Starbucks. Problem is when the competition finds out. We remember once meeting wiki company Jot’s founder Joe Kraus at Coupa Cafe, a place where Ross Mayfield, of competitor Socialtext, often had his alter-office.

Dick Costello, chief exec of Feedburner, starts blog — He focuses on entrepreneurship, and has some good tips about how to raise cash, and how to manage hiring, among other things.

AskCity’s map tools are nifty — We’ve already mentioned the useful local map, direction, movie, restaurant and other features offered by AskCity. Here’s the latest: You can now circle places on a map, such as an intersection, and then search for say, that coffee shop that your friend told you about, but which you forgot the name of — because it lets returns in its results all of the coffee shops within the circle you drew.

Google’s bus system — Every Google employee gets a ride to work, with a WiFi-equipped bus so they can work while commuting. (See NYT story).

Paul Mercer, interface guru, hired by Palm — Mercer, a former Apple employee, who designed the interface of the nano-sized Samsung YP-Z5, has been hired by Palm, to help it regain momentum in the face of Apple’s iPhone launch.

Forbes’ list of the world’s billionaires — The latest list is out, and Google’s showing is impressive. Co-founders Larry and Sergey are the two youngest on the long list of Californians.

Freebase reality check — Lot of excitement Friday about the launch of Freebase by Metaweb Technologies, billed by some to be the “synapses for the global brain,” but some people are yawning at the idea.

Even as global warming concerns grow, oil companies are getting more efficient at producing more oil — Which means more global warming. (See NYT story.)

Clearwire’s woes — Clearwire, the company that went public last week to raise more cash to build out its costly WiMax network, sees continued downward pressure. It went public at $25 last week. See graph at left, from this morning, where it dipped below $20 briefly. However, it rose at the end of the day.

FraudWall raises $1.01 million — We reported on the click-fraud company, Fraudwall, launched by Ron Conway and Jim Pitkow, in January. It has now raised $1.01 million of a $1.5 million planned first round, from Sherpalo Ventures and Baseline Ventures, according to PE Week. Sherpalo’s Ram Shriram is a new investor. Shriram, still on the Google board, is especially likely to have good insight into how important the click-fraud problem is for Google to solve.

Yet another photo/video site, Zannel, launches — Zannel is designed for mobile users. You can upload your camera-phone’s photos or video to Zannel’s web site, and you can send them to friends, through Zannel’s peer-to-peer network. The recipient gets an SMS (text message), opens it up and a link takes them to their WAP browser. We reported on its $6 million in funding here.

Clearwire, the company that is building WiMax, a new wireless technology boosts the performance of wireless broadband, has raised $600 million in its initial public offering. It begins trading today.

Clearwire, of Kirkland, Wash., reported a net loss of $240 million last year, largely because it is building out its WiMax network, and has yet to start selling it. It remains a big risk. Sprint-Nextel plans to roll out a competing WiMax network next year, and there are many other competing offerings outside of WiMax.

WiMax differs from WiFi in that it has much longer ranges — as much as 10 miles vs. WiFi’s reach of a few hundred feet.

The IPO priced this morning at $25 a share, at the top of its planned range. The IPO is signficiant because the stock markets have been jittery lately, the Nasdaq having lost more than 6 percent of its worth since WiMax filed its IPO papers. Telecom IPOs have been rare. Clearwire’s biggest backers are Motorola ($300 million invested) and Intel ($600 million invested)