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Smartphone Sales Are Strong, but Verizon Has a Loss

January 25, 2012 by Leave a Comment

Verizon Communications on Tuesday reported rising iPhone sales and revenue growth in its wireless business, but it booked a quarterly loss, primarily because of previously announced pension charges.

The company reported a net loss of $2 billion, or 71 cents a share, for the fourth quarter of 2011, in contrast to net income of $2.64 billion, or 93 cents, in the quarter a year earlier. Revenue climbed 7.7 percent, to $28.44 billion in the quarter, from $26.4 billion in the quarter a year earlier.

Adjusted for the pension charges, the income was 52 cents a share, just below the average forecast of 53 cents from analysts. Revenue was right in line with expectations, according to Thomson Reuters. Shares of Verizon fell 61 cents, to $37.79.

“Verizon finished 2011 very strong, both in terms of revenue growth and by delivering an 18.2 percent total return to our shareholders for the full year, and the company has great momentum for 2012,” Lowell C. McAdam, Verizon’s chief executive, said in a statement.

The company said strong sales of smartphones drove its wireless business to its best quarterly growth rate ever, up 13 percent to $18.3 billion in revenue. Verizon sold 7.7 million smartphones in the fourth quarter, 4.2 million of which were iPhones.

The company added 1.5 million wireless subscribers over the quarter, bringing its total subscriber count to 108.7 million.

“We have great momentum in wireless, and we expect to build on that strength,” said Francis J. Shammo, chief financial officer of Verizon, during a conference call after the earnings report was released.

Profit margins, however, dropped because of the high subsidies that Verizon pays for each new iPhone bought by customers when they commit to a two-year contract.

Wireless carriers subsidize a part of the retail price on most new cellphones to attract customers. The companies recoup the costs over the duration of the customer’s contract.

Verizon said this week that it had a large lead over its rival ATT in the race to build out a newer, faster network called 4G Long Term Evolution, or LTE. The company says it now has LTE networks deployed in 195 markets, compared with ATT’s 26 markets, and it plans to make coverage from such so-called fourth-generation networks as ubiquitous as its older third-generation networks by mid-2013. Verizon said it sold 2.4 million 4G devices in the fourth quarter.

Mr. Shammo added that Verizon’s wireless business intends to expand in the business market, as the company is planning wireless innovations for automobiles, health care and energy conservation.

He said Verizon is advancing its lead in 4G at a time when ATT is trying to obtain more spectrum needed to expand its networks. In one effort to gain spectrum, ATT tried to merge with T-Mobile USA, but eventually withdrew the bid after it faced resistance from government agencies over antitrust concerns.

While ATT was pursuing the merger, Verizon made a deal with a consortium of cable companies, including Comcast and Time Warner, for $3.6 billion worth of spectrum.

Though ATT is far behind in acquiring spectrum, it is not out of the 4G game, said Christopher C. King, a telecom analyst at Stifel Nicolaus. The company still has enough spectrum to deploy its nationwide 4G LTE network.

Verizon’s wireline business, which includes traditional landlines, continued to shrink. Quarterly revenue decreased 1.5 percent, to $10.14 billion.

To Simon Leopold, an analyst at Morgan Keegan, Verizon’s aggressive pursuit of 4G networks symbolizes its continued investment in superior technologies to attract consumers and beat rivals. “ ‘It’s the network’ is not just a tagline with Verizon,” Mr. Leopold said. “It’s something that’s deep within their culture.”

Verizon’s expansion of 4G will probably create new opportunities for makers of networking equipment, like Cisco, Alcatel Lucent and Juniper, meaning consumers can expect a wave of new devices compatible with the faster network in the coming year, Mr. Leopold said.

This article has been revised to reflect the following correction:

Correction: January 24, 2012

An earlier version of this article used net income figures that understated Verizon’s losses. It now uses updated net income figures that show the company lost $2 billion, not $212 million.

Article source: http://feeds.nytimes.com/click.phdo?i=cbf38fc8b376196b6de72a75996d0d67

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Netflix Lost 800,000 Members With Price Rise and Qwikster Plan

October 25, 2011 by Leave a Comment

“That is awful,” the friend, who was also a Netflix subscriber, told him under a starry sky in the Bay Area, according to Mr. Hastings. “I don’t want to deal with two accounts.”

Mr. Hastings ignored the warning, believing that chief executives should generally discount what their friends say.

He has since regretted it. Subscribers revolted and many dropped the service. The plan further tarnished a once widely respected Internet service that had already been wounded by an unpopular price increase in the summer. Mr. Hastings was forced to reverse the planned split — but not the price increase — three weeks later and apologized.

On Monday, the company revealed the damage that had been done. It told investors that it ended the third quarter of the year with 800,000 fewer subscribers in the United States than in the previous quarter, its first decline in years. The stock plummeted more than 25 percent in after-hours trading.

Despite the decline in subscribers, the company did well financially in the quarter. It reported net income of $62.5 million, or $1.16, a share, compared with $38 million, or 70 cents a share, in the year-earlier quarter. Revenue rose 49 percent to $822 million. Both revenue and income topped analysts’ expectations.

Like many other companies built in Silicon Valley, Netflix prides itself on its analytical, data-driven approach to making decisions. But it made a classic business misstep. In its reliance on data and long-term strategy, the company underestimated the unquantifiable emotions of subscribers who still want those little red envelopes, even if they forget to ever watch the DVDs inside.

Mr. Hastings said in an interview last week, his most detailed discussion yet of the bruising period, that he had been guilty of overconfidence and of “moving too quickly.” But he said he still believed — as do nearly all investors and analysts — that Netflix’s future lay not in DVDs but in streaming over the Internet. “We still need to move quickly in streaming,” he said.

Twice in the interview, Mr. Hastings linked the hostility toward Netflix’s price change and proposed breakup to the angry mood of the country, even citing the Tea Party and the Occupy Wall Street movement by name.

He said — and repeated it on a conference call for investors on Monday evening — that subscribers had been bothered more by the summer price shock than by the breakup plan. Until September, a combination of video streams and DVDs cost as little as $10 a month; now, that same package costs $16. “We are done with pricing changes,” Netflix said Monday in a letter to shareholders.

Mr. Hastings said he was not sure whether the plan to split the company had been presented to customer focus groups before it was made public. Mr. Hastings said he assumed it had been. But he said he did not recall what those focus groups had said about the plan.

He said Netflix was now trying to slow its decision-making to ensure that there was more room for debate about major changes at the company.

How Netflix came to be so out of touch with its customers is a cautionary tale for other companies that try to transform to new media from old. As the company’s streaming Internet service caught on with consumers, subscriber numbers soared and, with them, the company’s stock, rising ninefold from the start of 2009 to peak above $300 in July.

Last year, Fortune magazine put Mr. Hastings, 51, on its cover as the businessperson of the year after he seemed to pull off the rare feat of finessing the “innovator’s dilemma” by navigating Netflix to the digital future from its DVD rental business.

A key to its success was the way it blended its new and legacy businesses. While the library of material available for streaming was relatively sparse because of Hollywood licensing restrictions, Netflix customers could find many of those missing movies, especially new releases, in the company’s far larger DVD selection.

But Netflix needed to spend more money to license additional material for its streaming service. Collecting $10 a month from subscribers was insufficient as costs ballooned. Mr. Hastings defended the increase last week and again on Monday, but he said it was “too big a price change all at once.” Hubris played a big role in the errors, he said.

Article source: http://feeds.nytimes.com/click.phdo?i=0b69e678c0fd794fe4f975d382dfcb51

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Economix Blog: Did Bad Loans Continue at Bank of America After 2008?

October 18, 2011 by Leave a Comment

Bank of America is out with earnings on Tuesday. It had net income of $6.2 billion, or 56 cents per share, but that is not the part I found most interesting in a quick review of the numbers. Instead it is the progress, or lack of same, in getting past all the bad mortgages it sold into securitizations.

FLOYD NORRIS

FLOYD NORRIS

Notions on high and low finance.

In the quarter, the bank set aside only $278 million for representations and warranties claims. It is that number, not the $1.79 billion in charge-offs in the quarter, that affects reported profit.

I say “only $278 million” because that is the lowest quarterly figure for additions to that reserve at least since the fourth quarter of 2009, which is the first number I could find in a quick review of prior reports.

Here’s the trend:

Q4 2009: $516 million

Q1 2010: $526 million

Q2 2010: $1.248 billion

Q3 2010: $872 million

Q4 2010: $4.140 billion

Q1 2011: $1.013 billion

Q2 2011: $14.037 billion

Q3 2011: $278 million.

On its face, this is good news, a sign the problem is receding. After all, there was a limited number of representations and warranties that Bank of America — and more importantly Countrywide Financial — made, and someday the problem has to be over. The second-quarter provision was a huge one, a deliberate effort to take all the bad medicine there was.

But the decline was not because new claims have dried up. They amounted to $3.8 billion in the quarter, $99 million more than in the previous quarter.

In a commentary, the bank says the new claims come mainly from Fannie Mae and Freddie Mac, the government-sponsored enterprises. (You can find that commentary on Page 31 of the bank’s release.)

The demands from Fannie and Freddie, the bank says, “have become increasingly inconsistent with our interpretation of our contractual obligations.”

The process, it would appear, is getting nastier. The low provision does not mean final settlements are near.

One more note: Of the new claims in the quarter, $164 million came from mortgages sold in 2009 or later, a figure that is higher than in any of the previous quarters. That is well after Bank of America took over Countrywide, and after the mortgage market collapsed. It sounds like Fannie and Freddie are saying that bad practices continued.

Article source: http://feeds.nytimes.com/click.phdo?i=5cf87e87a3018f1ec90e380e732c89e0

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Business Briefing | Food: Campbell Soup’s Quarterly Income Tops Forecasts

September 3, 2011 by Leave a Comment

The Campbell Soup Company reported higher-than-expected quarterly results on Friday. Campbell said net income fell to $100 million, or 31 cents a share, from $113 million, or 33 cents a share, a year earlier. Sales rose 6 percent to nearly $1.61 billion. Excluding revamping charges, earnings increased 30 percent to 43 cents a share, topping the 38 cents expected by analysts. Stock in Campbell, which is based in Camden, N.J., fell 40 cents, to $31.46 a share.

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Stocks Close Flat as Investors Parse Quarterly Results

August 17, 2011 by Leave a Comment

The markets opened higher but then sank. While crucial sectors like energy and financial stocks recovered on Wednesday, after leading the overall market decline on Tuesday, technology shares were dragged lower as Dell dropped more than 10 percent.

On Tuesday, Dell said that a weaker economy had lowered demand, flattening its sales in the quarter that ended July 29, and that it had pared low-margin products. Its net income rose 63 percent in the quarter, but it lowered its revenue forecast for the rest of the year.

The technology sector was down about 1 percent at the market close. The consumer discretionary index dipped 0.38 percent. Abercrombie Fitch, the retailer, was down more than 8 percent and led the list of leading decliners among the 10 most actively traded shares during most of the session. In reporting its results, Mike Jeffries, the chief executive, said the company faced greater uncertainty this year.

“Costing pressures will be greater in the second half of the year, and macroeconomic uncertainty has increased,” Mr. Jeffries said. “However, our strong top-line momentum and overall performance for the past several quarters give us confidence that we are well positioned to navigate through this environment.”

A range of stocks gained on Wednesday, including those in telecommunications, utilities and consumer staples. Investors extracted guidance about the economy and consumer spending from results.

Seasonal factors appeared to help Target, for example, which reported a higher quarterly profit aided by school-related sales toward the end of the period. Its shares rose more than 2 percent. Staples closed slightly lower. It raised its outlook and its earnings exceeded expectations.

But the technology sector in particular, after the Dell results, “cast a pall over consumer spending and business spending for that matter,” said Mark D. Luschini, the chief investment strategist at Janney Montgomery Scott in Philadelphia.

“That is the overarching theme,” Mr. Luschini said. “Everybody is looking for any kind of signal or litmus test as to which way this is going to break.”

If the consumer pulls back because of political, economic or equity-related uncertainties after the recent market swings, he added, “that doesn’t leave a whole lot of horsepower to drive our economic activity, further enticing the risk of a recession.”

Over all, the declines in the equities market were slight — less than 1 percent in each of the three main indexes — but a reversal from the trend in early trading.

The market is recovering from volatility last week, and fell on Tuesday in the aftermath of a meeting between leaders of the euro zone’s two largest economies, France and Germany.

While many contend that the equities markets will remain unsteady for some time, bargain-hunters are benefiting from the recent lows.

“I think that the market is still reacting to a pretty oversold condition technically,” Tom Samuels, managing partner for Palantir Capital Management, said on Wednesday.

Mr. Samuels said that through early September, the market might continue to be “a little bullish,” but for now the respite was a time to reposition portfolios. Still, the balance was so tenuous that the financial markets were “one fundamental announcement” away, he added, from additional problems coming out of the euro zone or from economic statistics.

“There could be some more rough sailing ahead once we get out of August,” he said.

At 4 p.m., the Standard Poor’s 500-stock index was up 0.09 percent at 1,193.88. The Dow Jones industrial average was up 0.04 percent at 11,410.06 and the Nasdaq was 0.47 percent lower.

The yield on the 10-year Treasury note was 2.15 percent, compared with 2.23 percent late Tuesday.

After last week’s extreme volatility, with swings of hundreds of points, Wall Street tacked on gains over three consecutive trading days that helped shares recover by Monday from losses in the wake of the Aug. 5 downgrade of America’s long-term credit rating.

But then the markets declined on Tuesday after talks in Paris between Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France that analysts said fell short of easing concerns over how the euro zone’s finances would be handled.

On Wednesday, there appeared to be an early rally leading the riskier side of the market, and some strength in the commodity sector after a relatively benign reading in an important indicator of producer prices, Mr. Samuels noted.

The broadest indicator of wholesale prices edged up 0.2 percent in July, according to the Labor Department. Not counting food and energy, the indicator, the Producer Price Index, was up 0.4 percent, the most rapid increase in six months.

Article source: http://feeds.nytimes.com/click.phdo?i=82f3ccbb4068aec718f41f11a840ab8b

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DealBook: Barclays Reports Profit Plunge

August 2, 2011 by Leave a Comment

Barclays, one of the largest banks in Britain, said Tuesday that profit fell 38 percent in the first half because of costs for compensating customers for mistakes in selling some insurance and as earnings at its investment bank declined.

Net income fell to £1.5 billion, or $2.45 billion, in the first six months of this year from £2.4 billion in the same period last year, the company said. That was better than the £1.3 billion median profit estimate by analysts polled by Bloomberg News.

“It’s been a very difficult operating environment,” said the chief executive, Robert E. Diamond Jr. “I am pleased with the progress made across Barclays.”

Like many of its rivals, Barclays is reviewing its business to reduce costs. It was in the process of cutting about 3,000 jobs this year, Mr. Diamond said. Barclays cut 1,400 positions in the first half and Mr. Diamond said he “would expect the trend of the first half to continue and likely increase somewhat.”

Barclays said it set aside £1.8 billion for bad loans and other credit risks in the first half, a drop of 41 percent from a year earlier. Return on equity, a measure of profitability, improved to 9.1 percent from 6.9 percent. Barclays had set itself a target to reach a return on equity of 13 percent by 2013.

Barclays Capital, the securities unit, reported 9.3 percent lower pretax profit in the first half of £2.4 billion, after demand for its credit, currency and commodities services and products declined.

Pretax profit at its retail banking operation fell to £446 million in the first half from £1.2 billion after its operations on the European continent, especially in Spain, widened its pretax loss amid a deteriorating economic environment. It also set aside £1 billion to compensate customers it mistakenly sold some payment insurance to, it said.

Article source: http://dealbook.nytimes.com/2011/08/02/barclays-reports-profit-plunge/?partner=rss&emc=rss

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Chrysler Posts a Loss, but Operating Income Improves

July 26, 2011 by Leave a Comment

The company, which is majority owned by the Italian automaker Fiat, reported a loss for the quarter of $370 million, mostly because of a $551 million one-time charge to fully repay loans from the United States and Canadian governments.

Without the charge, Chrysler said it would have posted net income of $181 million in the second quarter; it had a net loss of $172 million in the period a year earlier.

The automaker also reported a 30 percent increase in revenue, to $13.7 billion, from the second quarter of 2010, the latest sign that its comeback from bankruptcy in 2009 is accelerating.

Chrysler, the smallest of the three Detroit car companies, said that new products including the Jeep Grand Cherokee helped it increase its share of the American market and sell 19 percent more vehicles in the second quarter than in the period a year earlier.

“There is no doubt that Chrysler Group has taken a huge step forward this quarter,” Sergio Marchionne, chief executive of both Chrysler and Fiat, said in a statement. Fiat owns 53 percent of the Detroit automaker.

Mr. Marchionne said Chrysler’s resurgence should gain momentum now that the government loans had been repaid and heavy interest payments had been shed.

“Refinancing our debt and repaying our government loans six years early reinforces our conviction that we are on the right path to rebuilding this company and restoring it to its rightful place in the global automotive landscape,” Mr. Marchionne said.

Chrysler is on track to achieve full-year revenue of $55 billion and earn $200 million to $500 million, excluding charges, he said.

The earnings were the first reported by the company since Fiat took a majority ownership stake by purchasing stock previously held by the American and Canadian governments.

Going forward, Chrysler and Fiat will consolidate their financial results and further meld their management teams. Mr. Marchionne is expected to appoint senior executives this week to oversee engineering, purchasing and other areas for both automakers, as well as regional chiefs for the combined companies.

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Demand for Nike Brand Helps It in Fourth Quarter

June 28, 2011 by Leave a Comment

Futures orders gained 12 percent, excluding currency fluctuations.

Nike’s net income in the fiscal fourth quarter, which ended May 31, rose 14 percent to $594 million, or $1.24 a share. Net income for the year ago period was $522 million, or $1.06 a share.

Nike was expected to earn $1.16 a share, according to the average estimate of analysts surveyed by Thomson Reuters.

Revenue for the quarter rose 14 percent, to $5.8 billion from $5.08 billion. Excluding currency movements, revenue climbed 11 percent.

Nike was expected to generate $5.528 billion in revenue in the period, according to a Thomson Reuters analyst poll.

Apparel retailers are struggling with higher material, labor and freight costs. But Nike was able to fend off such pressure because demand for its brand was so strong during the quarter, according to Matt Arnold, an analyst at Edward Jones.

“The best way to offset higher costs is to generate strong demand growth, and Nike was able to do that,” Mr. Arnold said.

Futures orders, excluding currency exchange rates — a closely watched measure of sales growth — came in ahead of Wall Street estimates. Orders for June through November increased 15 percent to $10.3 billion. Excluding currency effects, orders rose 12 percent, Nike said.

Robert Drbul, an analyst at Barclays Capital, expected futures orders to be up 8 to 10 percent.

Mr. Arnold, the analyst at Edward Jones, was expecting future orders to be up at least 8 percent. Strong futures orders suggest Nike will be able to raise prices later this year, he added.

Shares of Nike rose 4.5 percent, to $85.25 in after-hours trading.

Article source: http://feeds.nytimes.com/click.phdo?i=8dcad47643b1dd5366d4c0253f01a1fd

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