As we had anticipated, telecom giant Verizon Communications (VZ - Free Analyst Report) experienced a year-to-year share-earnings decline in the second quarter of 2010. In the three-month period, the bottom line fell to $0.58 a share, which is 8% below the 2009 tally, though a penny above our estimate.
This total excludes sizable nonrecurring charges, primarily related to previously announced severance payments and workforce reductions. Verizon has begun downsizing its traditional phone segment, as use continues to dwindle at a rather rapid rate. The company anticipates a significant number of employees will accept the buyouts, which included a bonus and benefits. In fact, at the year's midpoint, the company had already trimmed about 24,500 employees, or 12% of its workforce, from 2009.
And while the traditional phone business fades, the wireless segment continues to generate solid momentum. In the second quarter, Verizon added 665,000 retail customers under contract, bringing its total wireless retail count to 86.2 million. Adding a little fuel to the competitive fires, that's about one-third more new contracts than rival AT&T (T - Free Analyst Report) garnered in the same interim, despite the launch of Apple's (AAPL) fourth installment of the
(of which it is the exclusive carrier) at the end of the term. AT&T would likely be quick to remind us, however, that its revenue growth is proceeding at a much faster clip year over year.
Within the FiOS segment, Verizon continues to add customers at a healthy rate, having increased the number of new contracts every quarter since service began six years ago. In the June period, the company raised its Internet book by 5%, to 3.8 million FiOS users, and its TV subscribers by nearly 6%, to 3.2 million.
Investors seemed moderately pleased with Verizon's results, as the stock traded slightly higher on the release. That said, the story has not changed much here. The company still faces a challenging operating climate, though it appears to be improving. At the same time, the telecom battleground is fierce. In sum, VZ shares offer appealing long-term appreciation potential, though there may be sizable obstacles along the way.
About The Company: Verizon Communications was created by the merger of Bell Atlantic and GTE in June of 2000. It is a diversified telecom company with a network that covers a population of about 290 million and provides service to nearly 91.2 million. In the last few years, has acquired MCI (1/06) and Alltel (1/09). The company is also the largest provider of print and on-line directory information. Has a wireline presence in 28 states & Washington, D.C. and a wireless presence in every U.S. state & D.C., as well as operations in 19 countries.