Verizon net tanks on $962 million federal health legislation charge; Motorola Droid fizzling?

invisibleSHIELD case for iPad“Verizon has announced first-quarter 2010 results with adjusted earnings per share (EPS) of 56 cents, matching the Zacks Consensus Estimate while declining from 58 cents reported a year-ago,” Zacks Equity Research reports.

“Adjusted EPS excludes a $962 million one-time charge associated with the recent federal health-care overhaul which eliminated certain tax benefits related to retired employees,” Zacks reports. It also excludes merger integration and acquisition costs and expenses associated with the impending spin-off of specific wireline assets.”

Zacks reports, “Net income (attributable to Verizon) plunged 75% year-over-year to $409 million (or 14 cents a share), largely due to the hefty charges related to healthcare reform.”

“Verizon exited the quarter with 92.8 million wireless customers, up 7.2% year over year. Net customer additions for the quarter were 1.55 million (excluding acquisitions), down 89% year over year. Total retail customer base increased 4.4% to 87.8 million. Net retail postpaid subscriber additions for the quarter were 423,000,” Zacks reports. “The carrier’s archrival AT&T added 512,000 postpaid customers in the first quarter [and 1.9 million net additions over the same timeframe].”

MacDailyNews Note: Verizon is not alone. Roger Cheng reported for Dow Jones Newswire yesterday that “AT&T Inc.’s first-quarter profit fell 21% as a result of a $1 billion charge related to the nation’s overhaul of the healthcare system, while its wireless business continued to grow thanks largely to the enduring success of the Apple Inc. iPhone.” Full article here.

Zacks reports, “Verizon continues to extend nationwide coverage of its high-speed 3G wireless network, covering more than 285 million people. Moreover, the company is planning to launch commercial 4G services based on the Long-Term Evolution (“LTE”) standard in fourth-quarter 2010 across 25−30 markets. This will offer the carrier a head start over AT&T, which lags with its 4G LTE network launch planned in 2011.”

Full article here.

Back in March, The Wall Street Journal reported that Verizon warned in a note to employes “about the 40% tax on high-end health plans, though that won’t take effect until 2018. ‘Many of the plans that Verizon offers to employees and retirees are projected to have costs above the threshold in the legislation and will be subject to the 40 percent excise tax.’ These costs will start to show up soon, and, as we repeatedly argued, the tax is unlikely to drive down costs. The tax burden will simply be spread to all workers—the result of the White House’s too-clever decision to tax insurers, rather than individuals.”

“A Verizon spokesman said the company is merely addressing employee questions about ObamaCare, not making a political statement,” The WSJ reported. “But these and many other changes were enabled by the support of the Business Roundtable that counts Verizon as a member. Verizon CEO Ivan Seidenberg’s health-reform ideas are 180 degrees from Mr. Obama’s, but Verizon’s shareholders and 900,000 employees and retirees will still pay the price.”

Full article here.

Sinead Carew reports for Reuters, “Verizon’s Chief Financial officer John Killian said the worse-than-usual first-quarter decline in postpaid subscriber growth was due to a particularly strong fourth quarter and consumer moves to cheaper unlimited prepaid services. He said consumers would continue to move to prepaid, but he expects Verizon’s postpaid growth to improve as it aims to lure customers away from rivals with the latest smartphones and a network upgrade this year for higher speed data services.”

MacDailyNews Take: Good luck with that, Johnny (unless you’re planning on getting Apple’s iPhone, in which case you won’t need any luck).

Carew continues, “Piper Jaffray analyst Christopher Larsen said that while subscriber growth was disappointing, it helped Verizon’s wireless profits because it meant a reduction in the costs such as phone subsidies that Verizon incurs for adding new customers.”

Full article here.

Matt Phillips reports for The Wall Street Journal, “Building post-paid subscriptions is often closely tied to offering a hot new gadget. That’s why AT&T exclusivity deal with Apple for the iPhone has been a boon to the company… So with the softness in Verizon’s post paid numbers, a tantalizing question arises for any gadget geek. Is the Motorola’s Droid phone — based on Google’s Android operating plaform — fizzling? The gadget was once considered something of a potential rival to the iPhone. But you can’t help but wonder whether even diehard Googleheads thinking about buying a Droid might have been convinced to put off grabbing the Gadget when Google introduced it’s Nexus One smartphone back in early January.”

MacDailyNews Take: Wonder all you want, but they didn’t buy Nexus Ones, that much is for sure: Gizmodo: Google’s rebadged HTC ‘Nexus One’ is a total flop – March 16, 2010

Phillips reports on a question asked by an analyst on Verizon’s conference call yesterday. The analyst wondered what the expected iPhone refresh later this year will mean for Verizon:

Dave Barden of Bank of America Merill Lynch: There’s probably an iPhone refresh coming around the middle of the year. Obviously, last year’s game plan was to wait. It came, you guys really got more aggressive on your smartphone portfolio than you had really ever been in the third quarter, and that led to a market share swing back in your favor. Looking at it this year, what would be the game plan this year that you would do differently, if anything, to make sure that there isn’t a market share swing in AT&T’s favor, the way we saw last year?

Verizon’s CFO, John Killian, answered: We think we have found a very strong lineup. And, again, not just based on one operating system, but the Droid, Android-based system, the RIM systems. We’ve had some Microsoft launches recently. But you will see a lot of emphasis around the Droid as we go through the year. We think we have a very competitive lineup. There’s no question, Apple has done a great job with the iPhone. But look at our results. We’ve performed very well both from a growth — our revenue growth this quarter on the Wireless side is better than it was last quarter. Our service revenue is upticking. We have several different new devices coming as the year goes on, most notably the one I just mentioned, which is the HTC Incredible. So I think we’ll be earlier in the process this year of having very strong devices to be very competitive. But, again, based on multiple systems, and we think we’ll be in a very good position.

Full article here.

91 Comments

  1. Oh here we go. The whining about socialism, based on a lack of knowledge of what socialism is. But then again, most of the responders here are fat little potato chip eating mother’s basement living uneducated fools.

    Socialism is, specifically, the management of production by the public (read government) to control both inputs and outputs. The new healthcare plan drives 50 million people into paying for health insurance from health insurers. That’s capitalism you underemployed fat dorks.

    And taxing high-end healthcare plans is perfectly reasonable. The reasons for Verizon’s failures have little to do with health care plans and a lot to do with it’s own strategies. But creating a strawman argument is the best they can do.

  2. The fact of the matter is that these charge-offs have to do with the expiration of a questionable tax benefit created during the Bush days that was never intended to be permanent. The newly adopted health reform legislation has nothing to do with these balance sheet adjustments. This is nothing more than a Fox News [sic] style misrepresentation of the facts.

    Let me add that I stayed away from MacDailyNews for months because of its tendency to inject right-wing politics into its tech coverage. Please just stick with the Apple/Mac news and leave the propagandizing to Fox.

  3. this is MDN doing its typical political BS again

    corporate america is given a tax break to give its retirees a cadillac drug plan. US Congress says “not fair” when they are trying to increase coverage to a large section of the population that has no health coverage at all. The tax break is removed and since it no longer is a charge/deduction *against* ordinary income, it, of course, is charged and taxed *as* ordinary income.

    And note – Verizon said the new health plan “does reflect some of the company’s policy priorities” and that it was expected “costs will increase in the short term.”…but says nothing about over the long term.

    the guiding rule of our age:

    no long term gain if it causes short term pain

    that is why all of us in the US are a bunch of fat asses

    maybe Verizon’s quarterlies sucked because it has bad non-iphone products….that is the rhetorical line MDN should and usual spouts…

  4. And there goes the discussion….

    In a (most likely futile) attempt to steer it into the (ever-so-tiny) Apple-related direction, notice how these phone makers are now naming their phones with some actual names, rather than Nokia 5215 or Samsungh SCH-D209XW (or whatever)? Furthermore, these names now seem to be more and more hyperbolic (HTC Incredible??? Please! What’s next? Invincible?), all part of quite hopeless effort to somehow overshadow the king of the hill.

    And the answer to that iPhone refresh question came straight from the PR talking points (“very competitive lineup”, “very good position”, “very strong devices”, “very competitive”… very, very, very…). On the other hand, what else could he really say…?

  5. “I’m a brown skinned, anti war, anti establishment, left-leaning radical reformist who believes in universal care for all…”

    –Former carpenter–

  6. It would be nice if the writers would leave their political biases away from the articles. The term “Obamcare” is a tea party reference to the recently passed health care legislation. I hope the writers of MacDailyNews are not moving into the (Fox like) political arena, whether for or against.

  7. @iMaki, And

    Agreed! Government run postal service, food and drugs, agriculture, military, police, disease control, communication control, disaster relief, etc are all socialism! There are some idiots who think that only government run health care specifically is socialism e.g. Medicare. But I can see that you know better and would agree that we should privatize all of these socialist government run services. Only private corporations can do it right, in a free market. I prefer to have my country defended and policed and my food protected by a corporation I can trust, than some government socialist, liberal scheme.

  8. How many will lose their jobs due to the costs and therefore have to suck of the government teat for their healthcare?

    Oh, sorry, that’s the whole fscking goal for the two-faced Democrats.

    Most dependent voters vote for those who support them, however meagerly and shoddy the support is.

    Republicans believe in the individual and helping those who truly need help. Democrats believe in the collective, supported mostly by the state.

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