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Employee Buyouts Hit Verizon's Bottom Line

First-quarter profits were down 50% from a year ago, despite revenue growth, due to the costs of buying out 21,000 workers.
Expenses from employee buyouts helped drive Verizon Communication's net income down 50% in its first quarter, according to numbers released Tuesday. But solid growth in subscribers at its wireless subsidiary helped keep revenue growing.

For the quarter ended March 31, Verizon posted net income of $1.2 billion, or 43 cents per share, down from $2.4 billion, or 88 cents per share, in the same quarter last year. Much of that decline is due to charges incurred in the implementation of an employee buyout plan, under which 21,000 employees left the company during the fourth quarter. Excluding those and other charges, Verizon would have posted net income of $1.6 billion.

Despite the dwindling earnings, revenue was up 3.9% to $17.14 billion, from $16.49 billion a year ago, thanks in large part to the strong performance of subsidiary Verizon Wireless. The mobile-phone service provider, a joint venture with Vodafone Group plc, added 1.4 million subscribers for the quarter, and saw revenue jump 21.2%, from $5.1 billion a year ago to $6.2 billion.

Verizon also showed good growth in sales of its high-speed DSL lines, increasing subscribers by 46% year over year, and in its long-distance business, which saw a 13.3% increase in revenue, from $900 million to $1.0 billion.

The traditional domestic telecom business didn't fare as well--revenue was down 3.3% year over year, to $9.6 billion. Information services revenue also was down, losing 2.2% to $999 million. International revenue fell 9.5%, from $517 million to $468 million, due in part to deteriorating foreign-exchange rates.