Verizon (VZ) Sees Alternative to Apple (AAPL) in Microsoft (MSFT)
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So it begins.
Following Verizon's (NYSE: VZ) quarterly report Thursday morning, margins were on the brain of many. With Verizon and other carriers subsidizing the hot Apple (Nasdaq: AAPL) iPhone to the tune of about $400 per unit, profits have declined for the carriers as it takes longer and longer to recoup the initial outlay on the device through service plans.
Here's a brief progression of operating margins: in Verizon's third-quarter 2010, wireless operating margins were at 29.9 percent, dropped to 23.7 percent in the fourth quarter of 2011 and grew to 28.6 percent last quarter. Segment EBITDA margins were 47.2 percent, 42.2 percent, and 46.3 percent in the respective quarters.
One explanation for the widening margins is service revenue from voice and data in the wireless segment are beginning to pay off. With Verizon getting the iPhone in 2011, the first year was expected to be a bit of a challenge. But, Verizon said data revs rose 21.1 percent in the quarter, now making up about 43 percent of total service revs, so the move is slowly but surely working.
The WSJ also makes another point for Verizon: it's focus may now be shifting to iPhone alternatives. CFO Francis Shammo said Verizon would work on cutting costs to offset subsidy burdens. In addition, the firm will be more supportive of Microsoft's (Nasdaq: MSFT) Windows Phone ecosystem.
Verzion was unable to get the Apple iPhone until 2011 due to Apple's contract with AT&T (NYSE: T). Before getting the device, Verizon focused more on pushing Google (Nasdaq: GOOG) Android and its ecosystem. Shammo said Verizon is looking to do the same with a third offering.
Customers of Verizon surely have to be hoping for an alternative. Due to the untimely combination of the financial meltdown and soaring gas prices in 2008, leading to recession in 2009, and the adoption of higher-subsidized smartphones, Verizon has not only had to cut out its "New Every Two" program, but is now charging $30 for an upgrade. Couple that with increased costs related to Verizon's efforts to expand its 4G LTE network and data and voice plan pricing has shot higher.
Verizon pushing Windows Phone -- something which has had tepid response since its introduction in late 2010 -- would be huge from Microsoft. Also, it would be big for Nokia (NYSE: NOK), which has seen its North American sales go the way of Research In Motion (Nasdaq: RIMM). That is, down markedly.
Shares of Verizon are up about 0.8 percent ahead of the bell Friday.
Following Verizon's (NYSE: VZ) quarterly report Thursday morning, margins were on the brain of many. With Verizon and other carriers subsidizing the hot Apple (Nasdaq: AAPL) iPhone to the tune of about $400 per unit, profits have declined for the carriers as it takes longer and longer to recoup the initial outlay on the device through service plans.
Here's a brief progression of operating margins: in Verizon's third-quarter 2010, wireless operating margins were at 29.9 percent, dropped to 23.7 percent in the fourth quarter of 2011 and grew to 28.6 percent last quarter. Segment EBITDA margins were 47.2 percent, 42.2 percent, and 46.3 percent in the respective quarters.
One explanation for the widening margins is service revenue from voice and data in the wireless segment are beginning to pay off. With Verizon getting the iPhone in 2011, the first year was expected to be a bit of a challenge. But, Verizon said data revs rose 21.1 percent in the quarter, now making up about 43 percent of total service revs, so the move is slowly but surely working.
The WSJ also makes another point for Verizon: it's focus may now be shifting to iPhone alternatives. CFO Francis Shammo said Verizon would work on cutting costs to offset subsidy burdens. In addition, the firm will be more supportive of Microsoft's (Nasdaq: MSFT) Windows Phone ecosystem.
Verzion was unable to get the Apple iPhone until 2011 due to Apple's contract with AT&T (NYSE: T). Before getting the device, Verizon focused more on pushing Google (Nasdaq: GOOG) Android and its ecosystem. Shammo said Verizon is looking to do the same with a third offering.
Customers of Verizon surely have to be hoping for an alternative. Due to the untimely combination of the financial meltdown and soaring gas prices in 2008, leading to recession in 2009, and the adoption of higher-subsidized smartphones, Verizon has not only had to cut out its "New Every Two" program, but is now charging $30 for an upgrade. Couple that with increased costs related to Verizon's efforts to expand its 4G LTE network and data and voice plan pricing has shot higher.
Verizon pushing Windows Phone -- something which has had tepid response since its introduction in late 2010 -- would be huge from Microsoft. Also, it would be big for Nokia (NYSE: NOK), which has seen its North American sales go the way of Research In Motion (Nasdaq: RIMM). That is, down markedly.
Shares of Verizon are up about 0.8 percent ahead of the bell Friday.
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