P1 Wimax: Honey Have You Cut It?

Green Packet announced its earnings tonight.

At this rate, losses should pass 100 million this fiscal year! (see Would You Want To Invest In Green Packet? )

Yeah, Green Packet had a rights issue which did helped the balance sheet.

But.. look at the cash flow.

The rights issue brought in some 98.8 million in cash BUT as one can see in the table above, Green Packet's cash still decreased.

Yes, Green Packet is burning cash really fast!

And not helping is the massive losses.

Now I am not a fan of this Wimax business. Let me repaste what I wrote in an older posting Comments On YTL's RM3 Billion Broadband Venture

>>>>>>>>>

span >However, I am not a WiMax fan because I simply believe that this is an extremely difficult business venture to profit from. This is my flawed view. And if I am wrong, what's new? :p2

Many have tried WiMax already. Have you?

If you have, how impressed are you?

Are you happy with the upload/download speeds? Are you happy with the connectivity?

Ok, so how good is WiMax as a business?

Yeah, from a business perspective, how good is WiMax? :D

Take the more recent news. Like for example, early this month, on FT.com Nokia dismisses WiMax prospects

• “I don’t see that WiMax is taking hold anywhere in a big way,” said Anssi Vanjoki, Nokia’s head of sales and manufacturing, at a Nokia launch event in San Francisco.
  “I don’t think the future is very promising [for WiMax]. This is a classic example of industry standards clashing, and somebody comes out as the winner and somebody has to lose.

Clearwire is one of the leader in US and some are extremely impressed with what Clearwire has to offer.

Ok, le't go back in time a bit.

A year ago, on Washington Post, Whatever Happened To Sprint's WiMax Venture?.

Sprint then had to merge with Clearwire: Sprint, ClearWire merging WiMAX operations.

Clearwire has agreed to merge with Sprint's wireless broadband division in a new, as yet unnamed, joint venture. The deal has financial support in the form of $1.05 billion from cable giant Comcast, $1 billion from chip champ Intel, $650 million from Time Warner Cable and its subsidiaries, and $500 million from search Brobdingnagian Google. That's a grand total of $3.2 billion of outside investments, plus whatever cash Clearwire and Sprint might bring to the table.

Don't expect Sprint itself to bring a fat dowry, though. The company has about $2.4 billion in cash equivalents, but also a staggering $20.5 billion debt load. Sprint is trying to sell off its Nextel unit, which was acquired for $35 billion in 2005, but reports on that effort say that Nextel is only worth about $5 billion today. And ClearWire is in a similar situation of more debt than cash, albeit on a much smaller scale.

Ahem.. big money business. :D

SmartMoney had the following article WiMax Venture Gets Weak Reception From Market

• There's a lot to take in at first glance, and there's no simple explanation for Wednesday's early rise and late-in-the-day drop. This is a complex project that's failed to get off the ground, and that accounts for plenty of investor skepticism. A WiMax deal last summer between Sprint and Clearwire was agreed upon, but never signed.
  But you don't need to be Alexander Graham Bell to understand that a 9% one-day pop in a stock that has nearly one-fifth of its shares held short can create a classic short squeeze, even if it's a squeeze of short duration.
  
  Philip Solis, an analyst at ABI Research, sees short-term profit taking at work, but says the implications for the new Clearwire go well beyond Wednesday's trading.
  
  "Sprint chose WiMax in 2006: it had the vision, and it pulled together an ecosystem of chipset and equipment companies. But there was one missing piece: money," he wrote in a Wednesday report. "They needed financing and the confidence of the investor community. The formation of this joint venture completes the picture."

Here is the two year chart of Clearwire or CLWR on yahoo's finance. Not impressive at all.

And if you click the Income Statement on that yahoo finance, you would understand the reasoning of the poor performance.

So how?

Capital expenditure is massive in this business and yet the return is lacking.

>>>>>>>>>>>>>>>>>>

Tell me, is this being reflected in Green Packet?

Is Green Packet spending more and more money? And all one is seeing is more and more losses!

And after the rights issue, Green Packet is planning a placement of shares!

• Green Packet proposes 10% private placement
  Written by The Edge Financial Daily
  Tuesday, 10 November 2009 22:31
  
  PETALING JAYA: GREEN PACKET BHD [] is proposing a 10% private placement of up to 84.8 million new shares of 20 sen each towards raising additional funds expeditiously and strengthening its balance sheet position without incurring interest costs as opposed to bank borrowings.
  
  In a statement today, Green Packet group managing director C C Puan said the exercise may also broaden its institutional investor base.
  
  "The additional funds will enable us to take full advantage of local and international opportunities presented to us. In line with our business strategy, we require working capital for capital expenditure and operating expenses including the deployment of WiMAX infrastructure in Malaysia and other overseas markets," he said.
  
  Green Packet said the issue price would be determined and fixed by the board once approval had been sought from the relevant authorities.
  
  It said both its major shareholders, Green Packet Holdings Ltd (GPHL) and OSK TECHNOLOGY [] Ventures Sdn Bhd, had indicated their intention to participate in the proposed placement. It added that the placement shares were also proposed to be placed out to independent third-party investors to be identified later.
  
  It is expected to be completed in the current financial year ending Dec 31, 2009.
  
  Puan, who is also a substantial shareholder of GPHL, said: "This proposed private placement will enable GPB's major shareholders to continue supporting the 4G WiMAX operator business to further its positive prospects in Malaysia and to become a multi-market pan-regional leader."

Incredible?

A week earlier on Business Times.

• Packet One earmarks RM300m for 2010 capex
  
  By Goh Thean Eu Published: 2009/11/07
  
  Internet service provider Packet One Networks (Malaysia) Sdn Bhd (P1), which invested some RM300 million over the past two years, will expand more aggressively in 2010 by spending RM300 million in the year alone.
  
  P1, a wholly-owned subsidiary of Green Packet Bhd, said the funding would not be a problem as it has various options.
  
  "There will not be any funding problems. We are looking at various options, which include vendor financing," said P1 chief executive officer Michael Lai after a media briefing in Petaling Jaya yesterday.
  
  Vendor financing means if P1 buys equipment from a company, it could pay in instalments, for instance.
  
  The company has planned to invest up to RM1.5 billion from 2007 until 2012 to expand its wireless broadband coverage in the country.
  
  Currently, its services cover 35 per cent of the population in Peninsular Malaysia. By end 2012, its services are expected to reach over 60 per cent of Malaysians.
  
  It is also planning to roll out services in Sabah and Sarawak sometime in the first quarter next year.
  
  The company is expected to spend not more than RM300 million on Sabah and Sarawak market.
  
  "There are still studies to be done, we will know more about the actual capex when we go there," he said.
  
  Meanwhile, Lai said its sister company P1 International, is expected to commercially launch its services in Singapore by the end of next year.
  
  "The exact capex and timeline, we will reveal later. We will definitely roll out services in Singapore only when we have full population coverage. Hopefully, by end of next year, it will materialise," he said.

It just had a rights issue and it is selling shares via placement but yet the company INTENDS TO SPEND, SPEND AND SPEND!

And needless to say this posting would not be popular.

Anyway, given the fundamentals and the extreme losses, would you be shocked to see how Green Packet the stock has been performing lately?

Are we living in a market where stocks get rewarded insanely for losing more and more money???