Verizon Communications posted strong first-quarter growth in wireless subscribers, helped by sales of the Apple iPhone, but the effect on its earnings failed to impress investors.
With subscriber growth barely beating Wall Street estimates, some analysts complained about profit margins and others said revenue growth was lower than they had hoped at Verizon Wireless, the mobile venture of Verizon and the Vodafone Group.
Verizon Wireless posted net additions of 906,000 subscribers, just slightly ahead of expectations from analysts contacted by Reuters, who had predicted more than 888,000 subscribers.
While Verizon Wireless, the top mobile service, added only slightly more subscribers than it did in the fourth quarter, it was well ahead of its archrival, AT&T, which added 62,000 net subscribers in the quarter.
But a crucial point for investors when comparing the two was that AT&T, even though it no longer had exclusive rights to the iPhone, won more new iPhone customers in the quarter than Verizon.
The expectation had been that hordes of customers would flee AT&T when the Verizon iPhone arrived because popular phones typically experience a surge in sales during the quarter when they are introduced.
“It was a stronger new customer driver for AT&T,” Steve Clement, an analyst at Pacific Crest, said.
Verizon, which put the iPhone on store shelves on Feb. 10, said it sold 2.2 million iPhones by the end of the quarter, compared with the 3.6 million iPhone sales at AT&T, which had the phone for the entire quarter.
About 22 percent of Verizon’s iPhone customers switched from rival carriers, but about 23 percent of AT&T’s were also new to that company. This implies that Verizon won fewer than 500,000 new customers through the iPhone, while AT&T added more than 800,000 iPhone customers from other carriers.
In addition, higher sales of advanced devices like the iPhone came at a high cost for Verizon as its profit margin dipped, Michael Nelson, a Mizuho analyst, said.
Its margin was 43.7 percent, compared with the 46 percent it posted a year earlier, based on earnings before interest, taxes, depreciation and amortization.
While the iPhone helped Verizon raise subscriber numbers, its sales were not significantly better than analyst expectations, as some investors had hoped.
“Over all it was a solid quarter, not necessarily a blowout quarter,” Mr. Nelson said.
Verizon earnings rose to $1.44 billion, or 51 cents a share, from $443 million, or 16 cents a share in the same quarter a year ago, when it shouldered hefty one-time charges.
Revenue rose to $26.99 billion, from $26.9 billion in the year-earlier period; the average analyst expectation was $26.86 billion, according to Thomson Reuters.
Shares of Verizon fell 88 cents, or 2.3 percent, to close at $36.91.
posted Apr 14th 2011 10:34AM You won't be able to hear him for much longer, folks. Paul Marcarelli, aka "Verizon Guy," is being let go. As it turns out that wasn't even his character's name, VZW settling on "Test Man" when scripting the early shots. Now that company is "taking its ads in a different direction," a direction that apparently does not include Mr. Marcarelli. But, based on the tales he recounted to The Atlantic, that may be a good thing. Paul once heard someone say "Can you hear me now?" at his grandmother's funeral -- as her body was being lowered into the grave. Yup, it's time for a role change. 
The Motorola Xoom might be starting to look a bit pricey compared to some of its new competitors, but it seems that the company may have a solution in the offing. According to a leaked, supposedly authentic Verizon screenshot obtained by Droid Life, Motorola is apparently planning to launch an LTE-upgradable Xoom with just 16GB of storage instead of the current 32GB, which would presumably also open the door for a cheaper 16GB WiFi-only model. Of course, that's still a long way from being official, but cutting the storage in half is certainly one sure way to make a (seemingly necessary) price drop a bit more bearable. 
Okay, so maybe you'll care, but you'll still opt for the two-year option once your contract is up. That's according -- more or less, anyway -- to a Verizon Wireless spokesperson, confirming to our inquiry this afternoon that the carrier's one-year contract option will be eliminated on April 17th. The reason, as you might expect, revolves around historical customer preference. That's a fancy way of saying that most customers prefer the stout hardware discounts that are available with a lengthier two-year agreement, and barring that, they can still choose month-to-month, prepaid or a rival. Not that VZW would encourage the latter, but hey -- America's about options, man. 