VZ is up on this good news
Reuters Technology
Verizon Posts Loss; Cuts Outlook
By Jessica Hall
PHILADELPHIA (Reuters) - Verizon Communications, the No. 1 U.S. local telephone company, on Tuesday posted a first-quarter net loss due to the declining value of several investments, and cut its 2002 growth outlook on expectations the weak economy would hurt sales through the end of the year.
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Verizon (NYSE:VZ - news), the dominant local telephone company from Maine to Virginia, suffered from lower spending by corporate customers, fewer telephone access lines, shrinking local phone revenues, and lower-than-expected wireless subscriber growth.
Verizon, which is the fifth large U.S. telephone company to cut its outlook in the past week, said it does not anticipate any meaningful economic recovery until 2003. It previously expected to see a rebound starting in the second half of 2002.
Despite the dismal forecast, shares of Verizon rose $1.37, or 3.4 percent, to $41.37 in midday trading on the New York Stock Exchange as investors expressed relief that Verizon's guidance was not worse, analysts said.
``Given what's happened in the past week, this is actually borderline positive,'' said SoundView Technology Group analyst Michael Bowen. ``I am disappointed but not surprised about the revenue (forecast) coming down.''
POSTS LOSS ON CHARGES
The New York-based company's first-quarter net loss totaled $500 million, or 18 cents a share, compared with a profit of $1.6 billion, or 58 cents, a year ago.
Verizon's results for the quarter included charges totaling $2.5 billion, or 90 cents a share. The charges reflect a change in accounting for intangible assets, as well as the declining value of some investments such as CANTV in Venezuela (TDVd.CR) (NYSE:VNT - news), CTI Holdings in Argentina, and Metromedia Fiber Network Inc. (NasdaqNM:MFNX - news) in the United States.
Excluding these one-time items, Verizon's first-quarter profits were flat, at $1.97 billion, or 72 cents a share.
Wall Street analysts expected Verizon's earnings to be in the range of 70 cents to 75 cents a share, with a mean forecast of 72 cents a share, according to research firm Thomson Financial/First Call.
Total revenue rose 0.7 percent, to $16.4 billion. Revenue in Verizon's core local telephone dropped 4.1 percent, to $10.5 billion as the number of access lines in service fell 2.7 percent.
Verizon and the other Baby Bells have been hurt as more customers shift to wireless phones and electronic mail, which has reduced the number of telephone lines in service. Also, residential customers have reduced spending on luxury items such as second telephone lines, and businesses need fewer lines as they fire workers.
``The results were pretty much in line with everything on the regional side ... it's just like every single local company that's reported,'' said Steve Mygrant, co-manager of the Fifth Third Technology Fund.
Verizon said the weak economy would continue to hurt all areas of its business. For the full year, it expects to post earnings per share in the range of $3.12 to $3.17 -- below its previous forecast of $3.20 to $3.30.
Revenue in 2002 will be flat, or up 1 percent, from the prior year. It previously expected revenue to grow about 3 percent to 5 percent.
Verizon cut its capital spending budget by $1 billion to a range of $14 billion to $15 billion. Verizon's Chief Financial Officer Fred Salerno said the company had ``wiggle room'' to cut capital spending further, if needed, to offset weak sales and sluggish demand.
WIRELESS SUBSCRIBERS FALL SHORT
Verizon Wireless, a joint venture of Verizon and Britain's Vodafone Group Plc (VOD.L), added 186,000 new customers during the quarter, a sharp drop from the 518,000 new customers it added in the first quarter of 2001.
Verizon Wireless, the No. 1 U.S. wireless services company, attributed to shortfall to a decline in the number of subscribers it gets through resellers rather than through its own retail stores.
The weak subscriber growth slammed shares of Vodafone's American Depositary Receipts (ADRs) down 4 percent, or 65 percent, to $15.40. |
