Verizon Outpaces Growth Predictions, But Posts Loss Due to Layoffs

Verizon Communications (VZ), the giant telecommunications company, handily beat Wall Street's expectations for subscriber growth, but posted a quarterly loss thanks to a $3 billion charge from a major round of layoffs in its wireline business. Verizon, which along with Vodaphone owns Verizon Wireless, the leading U.S. mobile service provider, added 2.2 million mobile users compared with Wall Street's expectation of 1.5 million, according to four analysts cited by Reuters.But the new subscriber growth wasn't enough to offset a $3 billion workforce reduction charge, leading the company to post a net loss of $653 million, compared with net income of $1.24 billion one year ago. Verizon laid off nearly 8,000 workers last quarter.

Verizon shares were trading down nearly 1% in pre-market trading.

Overall revenue, which rose to $27.1 billion from $24.65 billion one year ago thanks to the acquisition of Alltel, fell short of analyst expectations of $27.33 billion, according to a Reuters poll.

Challenges Ahead: Tough Competitors, Dwindling Wireline

"In last year's turbulent economy, we took significant steps to strengthen Verizon going forward," Verizon Chairman and CEO Ivan Seidenberg said in a statement. "We focused on expanding wireless data and set the stage to deploy a nationwide 4G network later this year. We also expanded the scale of FiOS and our global IP network."

"We saw growth in all these areas in 2009, and we expect continued growth in 2010 and beyond, with a goal of delivering long-term shareowner value," Seidenberg added.

Verizon Wireless continues to boast more subscribers than any U.S. wireless provider, with 87.5 million retail customers, an increase of 25% over last year. But the company faces challenges from tough competition and a dwindling wireline business.

Craig Moffett, an analyst at Sanford C. Bernstein, said Verizon faces an uphill battle this year. "It could be a while before there's any uptick in the trend in enterprise, and we're starting the year with a price cut in wireless," Moffett told Bloomberg. "2010 looks like it's going to be another tough year."

Verizon ended 2009 with 222,927 employees, 7,413 fewer than it had in September, with most of the reductions coming in its wireline business, reflecting the trend of users giving up traditional phone service in favor of mobile phones.
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