Thursday, January 27, 2011

Verizon Communications (NYSE:VZ) Says Apple's iPhone (NASDAQ:AAPL) Accretive to Earnings This Year

Verizon Communications (NYSE:VZ) shocked the market when they said Apple's iPhone (NASDAQ:AAPL) will be accretive to earnings this year.

Canaccord says, "Verizon added just shy of a million subscribers in the latest quarter, affirming its position as the nation’s biggest carrier. The company said that a record number of subscribers were purchasing smartphones, with more than 75% of post-paid additions choosing devices running on the Google (Nasdaq:GOOG) Android or RIM (Nasdaq:RIMM) BlackBerry platforms. Strong growth in smartphones and the wireless business fuelled sales of $16.1 billion and net income of $4.6 billion. Notably, data sales stood at $5.3 billion as many of the new subscribers opted for expensive plans. 'The fourth quarter capped a strong second half of the year, resulting in improved earnings, solid momentum and an even stronger balance sheet,' summed Chairman and CEO Ivan Seidenberg. 'Verizon Wireless produced another quarter of impressive growth, with record-high profitability, as we continue to drive higher smartphone adoption and data use.' The results missed expectations on a few metrics, but investors seemed content, instead focusing on prospects surrounding the Apple (AAPL) iPhone 4, which will be offered by Verizon starting February 10. The company surprised the Street by predicting that the iPhone will be accretive to earnings this year – most had expected the device to pressure margins given the large subsidies Verizon will have to pay out. Some of the help may come from the carrier’s steps to limit its upgrade program and shorten its return window as part of the launch. The carrier may also be counting on luring customers from AT&T (NYSE:T) with the promise of cheap data plans, as management affirmed they would continue offering a $30-per-month unlimited plan to those who buy the iPhone at launch."

Verizon closed Wednesday at $36.40, gaining $0.61, or 1.70 percent. Apple closed at $343.85, gaining $2.45, or 0.72 percent.

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