Wednesday, January 30, 2019

Verizon slammed by $4.9B charge on Oath restructuring

Verizon’s money-losing media brands, including Yahoo and AOL, tanked profits last quarter as the new CEO shifts focus to growing the company’s high-speed wireless network.

Verizon’s Oath unit — which includes Yahoo, AOL and the HuffPost news site — booked a $4.6 billion pretax charge in the quarter ended Dec. 31.

The news came as Oath, the brainchild of former AOL boss Tim Armstrong, logged quarterly revenue of $2.1 billion, a steeper-than-expected drop of 5.8 percent versus last year.

Shares of Verizon closed down 3.3 percent to $53.28 Tuesday.

The problems come as Verizon’s new CEO Hans Vestberg moves away from the company’s previous plans to sell content — choosing instead to focus on development of its 5G technology.

AT&T, by contrast, is making a big push to become a media conglomerate on the heels of its purchase of Time Warner last year.

Verizon’s strategy switch has spurred the loss of about 800 jobs at Oath, or a 7 percent cut in staff, since Armstrong left in September. Oath has been rebranded as Verizon Media Group.

Verizon is in the process of slashing an additional 10,400 jobs across businesses in order to cut $10 billion in costs by 2021. By the end of 2018, Verizon slashed expenses by $2.3 billion.

Overall, Verizon’s net income fell 90 percent to $1.94 billion, or 47 cents a share, due to a $16.8 billion one-time tax benefit last year.

Verizon, which has 118 million wireless customers, said it added a net 653,000 subscribers during the fourth quarter, toppling FactSet’s estimate of 355,600. The expansion in its wireless business helped revenue rise 1 percent to $34.28 billion. Wall Street expected earnings of $1.09 a share on sales of $34.44 billion.

Craig Moffett, analyst at MoffettNathanson, applauded Verizon’s plan to return to its tech roots.

“Perhaps the best thing that can be said about Verizon is that it isn’t AT&T. That’s not a gratuitous shot at AT&T. It is simply an acknowledgment of the way portfolios are generally constructed,” he said.

“Verizon is simpler. It is growing faster. It is less levered, and, as a result, it is viewed justifiably as less risky. Verizon has no real exposure to a slowing China or a wobbling Brexit. It’s not overly levered, especially by comparison to AT&T.”

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