Verizon posts 4Q loss on $3B in layoff costs

Jan 26, 2010 By PETER SVENSSON , AP Technology Writer
In this Jan. 25, 2010 photo, mobile phones are displayed in a Verizon store in New York. Verizon Communications Inc. is showing a loss for the fourth quarter, brought down by a big charge for layoff costs. (AP Photo/Mark Lennihan)

(AP) -- Verizon Communications Inc. on Tuesday posted an unusual loss for the fourth quarter, as a charge for layoffs in its shrinking landline business overshadowed the growing, and profitable, wireless business.

And even the wireless business ran into trouble, as tough competition cut into Verizon's .

Verizon CEO Ivan Seidenberg told analysts on a conference call that the company continues to feel the effect of the economic downturn, particularly in selling service to businesses.

"We're facing some more significant headwinds than we thought we would face from the economy," he said. He is now expecting a more robust recovery in 2011.

Verizon shares fell 58 cents, or 1.9 percent, to $30.10 in morning trading.

The nation's second-biggest phone company lost $653 million, or 23 cents per share, in the last quarter. In the same period a year earlier it had a profit of $1.24 billion, or 43 cents per share.

Excluding one-time items, mainly consisting of a $3 billion charge for severance and other costs associated with layoffs, Verizon says it earned 54 cents per share. That was a penny below the average analyst estimate, as polled by Thomson Reuters.

Those estimates were already reduced, after Verizon warned early this month that it paid higher-than-expected subsidies to put phones in the hands of customers. Verizon Wireless is fighting to attract high-paying subscribers away from AT&T Inc. and its exclusive iPhone. AT&T reports earnings Thursday.

Verizon's revenue rose 10 percent to $27.1 billion, largely due to the acquisition last January of Alltel Corp. Analysts were expecting $27.3 billion.

New York-based Verizon ended the quarter with 222,927 employees, 7,413 fewer than it had in September. The have come on the traditional phone-company side, as many customers give up their lines in favor of using only cell phones or phone service from cable companies. Chief Financial Officer John Killian said the company cut 13,000 jobs on the wireline side last year, and expects a similar number of cuts this year.

Analyst Craig Moffett at Sanford Bernstein noted that the Verizon's overall wireline business did worse than expected in the fourth quarter, adding a net of just 153,000 video subscribers, half of what it gained in the fourth quarter the year before. He called the development "troubling," considering that fiber-optic video and Internet service is Verizon's way of compensating for dwindling voice service.

Verizon Wireless, already the largest cell phone carrier in the country, added 2.2 million customers to end the year with 91.2 million. However, 1 million of the new customers signed up through a reseller such as Tracfone LLC rather than directly through Verizon. Such customers generally pay much less than customers who sign contracts under the Verizon brand.

Higher subsidies for phones meant that Verizon Wireless' operating margin shrank 2.6 percentage points to 27.3 percent. The competition in the wireless market has only gotten tougher since the quarter ended: Two weeks ago, Verizon cut the price of unlimited voice service to $70 per month from $100. AT&T quickly made a similar move. Both carriers are betting on making back the money through higher charges for data service.

It's not clear when AT&T's exclusive hold on the iPhone ends, and Verizon might get an Apple device to sell this year. In the meantime, it's pushing phones running Google Inc.'s Android software as its main alternative to Apple's phone.

owns 55 percent of Verizon Wireless. It counts all the wireless revenue on its books, but 45 percent of the profits flow to joint venture partner Vodafone Group PLC of Britain.

Explore further: Netflix branches into films with 'Crouching Tiger' sequel

not rated yet
add to favorites email to friend print save as pdf

Related Stories

Verizon 1st-qtr profit, revenue beat expectations

Apr 27, 2009

(AP) -- Verizon Communications Inc. said Monday its earnings grew 5 percent in the first quarter, boosted by its acquisition of Alltel Corp. and strong demand for its wireless, Internet and TV services.

Verizon profit falls 30 pct on restructuring costs

Oct 26, 2009

(AP) -- Verizon Communications Inc. reported a 30 percent drop in third-quarter earnings Monday as it couldn't sign up enough new subscribers to offset higher costs from laying off workers and absorbing an ...

Verizon 2Q profit falls, tops view, plans job cuts

Jul 27, 2009

(AP) -- Verizon Communications Inc., the nation's largest wireless carrier, said Monday its second-quarter profit fell 21 percent as cost-cutting in its wireline business failed to keep pace with falling ...

Economy and iPhone subsidies trim AT&T's 2Q profit

Jul 23, 2009

(AP) -- AT&T Inc.'s earnings fell 15 percent in the second quarter as it subsidized a record-setting launch of the newest iPhone. The weak economy also continued to sap its landline business.

AT&T profit dips but wireless results strong

Oct 22, 2009

(AP) -- AT&T Inc.'s net income dipped as revenue from traditional landlines fell faster than the company could cut costs. But in the growing wireless industry, AT&T is thriving, adding a record 3.2 million ...

AT&T to buy territories from Verizon for $2.35B

May 09, 2009

(AP) -- AT&T Inc. said Friday it will buy the assets of Verizon Wireless in 79 mainly rural areas for $2.35 billion, a deal that will affect more than 1 million subscribers.

Recommended for you

What's PayPal's first solo move?

8 hours ago

PayPal's impending split from long-time partner eBay Inc. will ratchet up its appeal to online retail competitors such as Amazon.com and give it the freedom to aggressively take on new mobile pay challeng ...

AOL to feed more video, news to Microsoft's MSN

13 hours ago

AOL will provide Microsoft's MSN with more video and additional news stories from popular sites such as The Huffington Post and TechCrunch in an expansion of a deal aimed at selling more digital advertising.

Microsoft to tap $2-trillion Indian cloud market

17 hours ago

Microsoft announced plans Tuesday to offer its commercial cloud services from Indian data centres as it seeks to tap what it calls a $2-trillion market in the country where Internet use is growing rapidly.

User comments : 1

Adjust slider to filter visible comments by rank

Display comments: newest first

Caliban
1 / 5 (1) Jan 26, 2010
Hard to be certain, but I would expect that a good portion of the actual bad news was disguised in the apparent lump-sum $3 billion "layoff cost". Be on the lookout for more in the near future.