April 20, 2021

Storm and Pension Costs Leave Verizon With Bigger Quarterly Loss

Verizon Communications is still adding plenty of customers and selling a lot of cellphones, but the impact of Hurricane Sandy and pension costs sank the company’s quarterly earnings.

In November, the hurricane knocked out wireless service for all of the big carriers in the Northeast. But Verizon, based in New York, was hardest hit.

The storm surge flooded its central offices in Lower Manhattan, Queens and Long Island, causing power failures, which disrupted a large portion of its old landline service in those areas. The company took about a week to restore most of its wireless service.

“Sandy had a dramatic effect, particularly on the wire line business, due to the heavy concentration of damage in the New York metropolitan area,” said Francis J. Shammo, chief financial officer of Verizon, on the company’s earnings conference call. “Our challenge was to restore service to customers as quickly as possible, while still managing to meet the demand for new services.”

The company reported on Tuesday a fourth-quarter loss of $4.22 billion, or $1.48 a share, more than double the loss a year ago. Damage from the hurricane cost 7 cents a share, and pension charges reduced earnings by $1.55 a share, Verizon said. Without those charges, the company would have earned 45 cents a share, lower than the 50 cents predicted by analysts surveyed by Thomson Reuters.

Revenue climbed to $30.05 billion, a 5.7 percent increase from a year ago, and slightly higher than estimates.

Verizon said its wireless business, a joint venture with Vodafone of Britain, had a strong quarter. It sold 9.8 million smartphones, compared with 7.7 million in the same quarter a year ago, and added 2.1 million contract subscribers, the most valuable type of customer, versus 1.2 million a year ago.

The iPhone was Verizon’s top-selling smartphone in the quarter, with 6.2 million sales — almost half of which were the iPhone 5, the latest model of the phone. The strong number suggests that demand for Apple’s smartphone is not weakening, despite previous reports that Apple had reduced orders for iPhone parts because sales were slower than expected.

Android phones made up a majority of Verizon’s remaining smartphone sales. Verizon said sales of Windows phones had steady but slow growth.

Chetan Sharma, an independent mobile analyst who does consulting for carriers, said it was impressive that Verizon Wireless continued to post strong phone sales while expanding its customer base. Its phone plans are generally more expensive than the competition’s, and growth of the business shows that customers have faith in Verizon’s network technology, Mr. Sharma said.

Verizon is leading the race to build out its fourth-generation network, called LTE, which is faster and more efficient than its predecessor. The company has deployed LTE in 476 cities; ATT, the second-biggest American carrier, is second with 135 cities.

“The investment they’ve made in the network is showing,” Mr. Sharma said. “When consumers think of changing operators or upgrading, they’re choosing Verizon because of what they’ve experienced, as well as what they’ve heard about the network in terms of reliability across the country.”

This year is shaping up to be another strong one for Verizon. Its new shared data plans, which allow customers to pay for one pool of data and share it across multiple smartphones, tablets and laptops, are helping it bring in more money from subscribers over all. Average monthly revenue from each account grew 6.6 percent to $146.80 in the fourth quarter. Already, 23 percent of Verizon’s accounts are on shared data plans.

The faster the network, the faster people will use their data allowance and eventually buy more. On top of that, data is getting cheaper for Verizon to deliver. The company says the 4G LTE network is five times more efficient than its predecessor, 3G. That means the more people who buy devices that connect to the newer network, like the iPhone 5, the more money the company will eventually gain.

“As more customers choose 4G LTE smartphones and devices, we expect the continued migration of data traffic from 3G to our lower-cost 4G LTE network will drive further improvements in operating and capital efficiency in 2013 and beyond,” Mr. Shammo said in the earnings call.

This month, Research in Motion is expected to release its BlackBerry 10 smartphones. Mr. Shammo said Verizon was hopeful that the new phones would be successful.

“We have very loyal BlackBerry users in our base, and we will see how that goes,” he said. “I think more choice for our customers is better for us and for the consumer and for competition.”

Article source: http://www.nytimes.com/2013/01/23/technology/storm-and-pension-costs-leave-verizon-with-bigger-loss.html?partner=rss&emc=rss

Economix: The Auto Industry, Stuck in the Slow Lane

On the assembly line at a Ford transmission plant in Sterling Heights, Mich., last month.Carlos Osorio/Associated PressOn the assembly line last month at a Ford transmission plant in Sterling Heights, Mich.

Many of those grasping for a sign of economic optimism these days have pointed to the auto industry. The argument is that as supply chains come back on line following the Japanese earthquake and tsunami, more automobiles will be available for sale to consumers who have been waiting for cars to arrive.

But don’t expect a roaring comeback yet. A report released on Wednesday by AlixPartners, a business consulting firm, projects modest sales growth for the foreseeable future. The report forecasts that United States auto sales will reach 12.7 million units this year, up from the 11.5 million of 2010, but still far below the 16-million-plus that the industry regularly posted in the mid-2000s. AlixPartners forecasts 13.6 million sales in 2013, and does not project that the industry will get back to its peak before the recession “in this current cycle.”

According to the report, several factors are restraining growth in car sales. Unemployment remains high and housing values are depressed, making it difficult for families to tap housing wealth for car purchases. Historically, the report found, one in five vehicles sold has been financed by an appreciation in a car buyer’s home value.

And in a survey of 1,000 Americans by AlixPartners, 83 percent said they had delayed the purchase of a vehicle or planned to wait another year before buying a car.

John Hoffecker, managing director at AlixPartners, said the level of sales before the recession was unsustainable.

“Many people were thinking that was the norm,” Mr. Hoffecker said. “And our view was that it was not actual demand.”

Instead, he said, sales were buoyed by easy financing by carmakers and rapidly appreciating home and stock values. What is more, he said, automakers did not pay enough attention to their cost structures when selling cars, sometimes at a loss.

On the positive side, said Mr. Hoffecker, American automakers have already regained their profits. And future sales will be fueled by population growth in the United States as well as growing demand in developing markets.

The bad news is that the depressed level of auto sales will not help all the laid-off autoworkers get back to work. While engineers and sales representatives have been rehired to levels before the recession, Mr. Hoffecker said, production labor “is not going to come back any time soon.”

Article source: http://feeds.nytimes.com/click.phdo?i=d46651373caaaae965be1966b5186317