Verizon Stung Despite Mobile Growth, Plans Cuts

Verizon Communications' fourth-quarter 2009 sales were slightly better than expected, but the telecom giant on Tuesday wound up posting a loss due to expenses from its Alltel acquisition and weakness in certain markets.

Verizon (NYSE: VZ) reported revenue of $27.1 billion in the fourth quarter, up 9.9 percent from the fourth quarter of 2008. But on a pro forma basis, where Alltel's Q408 revenue is added into the mix, year-over-year growth was just 0.2 percent.

Thanks to one-time layoff costs and other charges, the company posted a net loss of $653 million, or $0.23 earnings per share (EPS). If all of the one-time charges were taken out, net income would have been $3.3 billion, or EPS of $0.54, a slight drop from $3.4 billion in Q4 2008.

A consensus survey of analysts by Thomson Reuters projected EPS of $0.54 on sales of $27.3 billion.

For all of 2009, annual operating revenue was $107.8 billion, an increase of 10.7 percent from 2008 on a reported basis and 1.5 percent on a pro forma (with Alltel included) basis.

"We feel that our organic momentum is good," Verizon CEO Ivan Seidenberg told a conference call of analysts. "We had good growth in all our strategic areas ... but we're facing some more significant headwinds than we thought we would face from the economy ... The economy won't help us as much as we thought."

As a result, the company announced on the call it plans to reduce about 11 percent of its workforce, which translates to around 13,000 people. Those reductions will chiefly impact Verizon's wireline business, which continues to be far weaker than its mobile unit.

Verizon added a net of 1.2 million new customers to its mobile service in Q4 and 4.6 million for the year, for a total of 91.2 million subscribers. That's a 26.6 percent increase over 2008 subscriber levels, although the Alltel acquisition played a part in that figure. The company also said the Motorola Droid proved a big hit with customers.

Wireless revenue grew by 22.5 percent from the previous year, the company said.

Additionally, the company added 153,000 new customers for its FiOS fiber-optic broadband service, along with the same number of FiOS TV customers. Verizon now has 3.4 million FiOS broadband customers and 2.9 million FiOS TV customers. Revenue for that business was up 25.5 percent year-over-year to $1.7 billion.

Enter Apple

All eyes are on Verizon right now with the impending launch of Apple's "latest creation," the rumored tablet device, as well as rumors of an iPhone for Verizon Wireless. That's a bit of a recent change from most speculation that Apple (NASDAQ: AAPL) would only move the iPhone to Verizon once its exclusive contract with AT&T ends this summer.

But now Tim Horan, a telecommunications analyst at Oppenheimer & Co., says Apple will go to all of the major carriers in the U.S. -- starting with T-Mobile USA this summer, then Verizon Wireless and Sprint Nextel in the fall. Apple will also debut product for Clearwire, the 4G start-up, in 2011, Horan wrote in a note yesterday.

The news for Verizon may come tomorrow. Boy Genius Reports, the mobile phone blog, had an anonymous report from a supposed Verizon employee claiming there would be an employee Webcast on Wednesday at 1 pm ET to launch new products, something the company does every quarter. This time, it just happens to fall on the widely expected launch date for an Apple tablet.

Andy Patrizio is a senior editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.


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