Verizon Communications, Inc. Case Analysis

Topics: Financial ratio, Revenue, Financial ratios Pages: 6 (1863 words) Published: April 16, 2006
Verizon Communications, Inc. has many strengths, weaknesses, opportunities and threats as an organization. This case analysis will highlight the top three for each category and provide a rational for each factor. The SWOT analysis will serve as a tool for identifying alternative strategies for the organization and help define a 3-year growth plan. Various matrices, including a SWOT analysis and a Financial Ratios Analysis, will also support specific strategies and long-term objectives. Other relevant, recent activities and supporting research will also be supporting the strategies defined in the case analysis. Verizon Communications, Inc. is one of the largest providers of broadband and wireless communications in the United States (David, 2004). Verizon operates wireless networks and serves home, business and wholesale customers in 28 states, totaling 49.3 million customers nationwide (Verizon.com, 2003). With their Corporate headquarters in Manhattan, New York, Verizon has nearly 215,000 employees and generates annual revenues of more than $71 billion from four business segments: Domestic Telecom, Domestic Wireless, Information Services and International (Verizon.com, 2003).

Although Verizon Communications is a young organization, formed in 2000, its parent companies have a very solid history and foundation (David, 2004). Verizon was an organization born from the merger of Bell Atlantic and GTE Corp (David, 2004). GTE and Bell Atlantic were two of the leading telecommunications companies in the U.S. and internationally (David, 2004). Their capabilities ranged from providing telephone access lines, wireless services and networks and various Internet services (David, 2004).

Verizon Communications has well defined goals and values in lieu of the traditional mission and vision statements (David , 2004). However, mission and vision statement recommendations will be defined in the case analysis in order to provide clear understanding of what the business is in the today's industry and what is recommended it become in order to execute a long-term growth strategy. This is an important component of a long-term growth strategy so that an organization can stay focused and committed to the objectives at hand. As David states in Strategic Management Concepts, "Business Week reports that firms using mission statements have a 30% higher return on certain financial measures than those without such statements." (David , 2004)

Verizon Communications financial health is positive, but questionable. For example, in 2002, Verizon earned over $67 billion in annual revenues, but only closed the year with $4 billion in net income due to the $49 billion in long-term debt that was paid out (David , 2004). They continued this trend into 2003 with virtually flat growth in revenues and an increase in operating expenses, closing the year with over $67.4 billion in revenue and $60 billion in operating expenses, which resulted in a decline in net income of $3 billion (Verizon Communications Interactive Annual Report, 2004). Verizon did improve things into 2004 by increasing their revenue by $3.8 billion and decreasing their operating expenses by $1.8 billion, closing out the year with a net income of $7.8 billion (Verizon Communications Interactive Annual Report, 2004). Although it is apparent that spending had to decrease in order to remain profitable, it is still questionable how Verizon will close 2005 given the February 14, 2005 acquisition of MCI for $4.8 billion in equity and $488 million in cash (Thonis, 2005). Verizon does have strong financial ratios when compared to the industry, especially in the area of Profitability ratios (MSN Money, 2005). Therefore, it is to no surprise that they were able to make this acquisition to continue growing their business.

Financial Ratios for Verizon Communications Financial Ratios for IndustryAnalysis Liquidity Ratios
Current Ratio.6.7Strength
Quick Ratio.50.5Neutral...

Cited: David, F. (2005). Strategic Management Concepts (tenth ed.) New Jersey. Pearson
Prentice Hall.
Verizon home page.(2003). Verizon Communications Company Profile.
Retrieved December 9, 2005, 2005 from http://multimedia.verizon.com/responsibility/profile/index.aspx
Verizon home page. (2004). Verizon Communications 2004 Interactive Annual
Report
MSN Money (2005). Verizon Communications: Key Ratios. Retrieved December 11,
2005 from http://moneycentral.msn.com/investor/invsub/results/compare.asp?Page=GrowthRates&Symbol=VZ
Thonis, P. (2005). Verizon to Acquire MCI for $5.3 Billion in Equity and Cash.
Retrieved December 9, 2005, 2005 from http://newscenter.verizon.com/proactive/newsroom/release.vtml?id=89338
Verizon home page. (2005). Verizon Customer Satisfaction – Award & Recognition.
Retrieved December 10, 2005 from http://www.verizonwireless.com/b2c/aboutUs/customersatisfaction/awards.jsp
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