Financial Analysis Of Verizon And Recommendations (Term Paper Sample)

            FINANCIAL ANALYSIS OF VERIZON AND RECOMMENDATIONS Name Institution Instructor Name Date   TABLE OF CONTENTS EXECUTIVE SUMMARY……………………………………………………………3 SWOT ANALYSIS………………………………………………………………….....3 RECOMMENDATION AND JUSTIFICATION……………………………………...4 CONCLUDING THOUGHTS………………………………………………………….6 REFERENCES…………………………………………………………………………..7   EXECUTIVE SUMMARY Verizon is an American based multinational corporation in the Telecommunication and mass media industry. Verizon is cooporated in Delaware  but the company itself is based in New York City. Its key products  include digital television, cable television, telematics, fixed line, mobile broad band and internet related services.Verizon emerged when the justice department mandated  AT&T  corporation what was at the time the seven baby bells in 1984. Actually the first name for what we know Verizon was Bell atlantic. Later in 1997 Bell Atlantic merged with NYNEX which was one of the seven baby bells and moved from Philadelphia to New York which was NYNEX headquarters. Later in 2000 Bell atlantic acquired GTE a direct competitor in the telecommunication industry which was in most areas that it was not in as part of its expansion plans. It  was after this that it changed from Bell Atlantic to Verizon. Other signifacant parts of its expansion include acquiring AOL and yahoo in 2005 and 2007 respectively. Verizon wireless which is a subsidiary of Verizon company is currently the largest wireless communication company in the country with over 147 million users. It is also the second largest telecommunication  company in terms or revenue only second to AT&T . Currently it has over 162,000 employees. Its revenue as of 2006 stood at $126 billion and a net income of  $22.52 billion. The shareholders got $ 3.87 earnings per share which marked a 10^th consecutive year of increase in earnings (Verizon, 2017). With the increase in the number of subsidiaries and more products such as security solutions Verizon seems to be a company adapting with the changing times and it is here to stay. SWOT ANALYSIS STRENGTH: One of the biggest strength that Verizon has is its brand. Infact it has been ranked top 100 of the most valuable brands, recognizable and generally valuable in business terms by all reputable research firms (Brown, 2017). Thus consumers generally associate the brand with quality and reliability.The second strength is economies of scale. Verizon in the US alone has access to 98% of the territory (Verizon, 2017). With this in place it is able to manufacture, distribute, advertise e.t.c its products in large volumes thus decreasing the cost (Piercy & Giles, 1989). To add to that, the quality of Verizon’s products itself is a strength. By virtue of its services it has a loyal customer base. WEAKNESSES: One of the challenges that Verizon faces is the high cost of infrastructure that is required in the telecommunication industry. With changes in technology new infrastructure is need and some cost a lot of money in terms of acquiring and maintaining. Inability to compete in terms of pricing is also a challenge that is created as a result of Verizon culture of offering high quality services. The high quality services come at a price which has to be transferred to the consumers. Some of the consumers find the pricing high as compared to other similar goods offered by companies such as Sprint. THREATS: The biggest threat to Verizon is the direct competitors in the telecommunication especially AT&T mobile and T-mobile. As discussed earlier, AT&T is infact the biggest competitor in terms of revenue streams. The competitors such as AT&T also have a strong brand and thus take consumers who would otherwise be using Verizon’s product. Government regulations is also a threat to telecommunication companies such as Verizon due to their sensitive nature.Apart from the internal competitors, there is also foreign threat from companies wishing to invest in ares in which Verizon is occupying. The current labor cost that is incurred by Verizon is in itself a threat. This is because the cost increases the overall operating cost which in turn reduces the profit. Over the years the employee pension funds has been increasing. OPPORTUNITIES: Global growth is one of the things that Verizon has as an opportunity. The world is now a global village with over 7 billion potential customers. Another opportunity is in diversification. The technological world is wide and Verizon can decide to venture into other opportunities such as advertising, computers manufacturing and programming. RECOMMENDATION AND JUSTIFICATIONS Recommendations#1 Wireless equipments get the most capital allocaction single handedly receiving $ 22, 238 million, 23,119 million and 21,625 million in year 2016, 2015 and 2014 respectively. This is because it is the backbone of Verizon in terms of revenue and brand.The revenues generated from wireless were $ 89,186 million , $91680 million and 87,640 million in year 2016,2015 and 2014 respectively. From the above figures alone there is a direct relationship between capital allocated and revenue made, thus it will be wise for Verizon to increase its capital expenditure to increase competitiveness and also maintain its brand Recommendation#2 The real strategy for growth of Verizon has been through acquiring  other companies such as Yahoo and GTE. Other companies that have been acquired by Verizon over the years include ;  skyward to help in down operations,  XO communication in the fibre optic industry, LQD wifi, FleematicsVessel technologies among others. However right now with over 98% access to the US and over 162,000 employees it has more potential of growing internally as opposed ro acquiring new synergies. Over the last 3 years to has used an average of just over $ 22,000 million in infrastructure annually which can aid it when it comes to internal growth. It is highly unlikely that a Verizon can be acquired by in the foreseeable future. However if this was to happen, then AT&T will be the most likely choice, In regards to culture it will be easier as their culture heritage can be traced back to the seven bells days. With regard to the overlapping business that will make AT&T a monopoly however due to the different customer preferences it may have to run the products differently. #Recommendation 3 The average outstanding debts for Verizon has been $ 106,113 million, $ 112,833 nillion and $107,978 in years 2016, 2015 and 2014 respectively. The debt to equity ratio was 8 in 2015 while ideally it should be less than one. This figure has risen by more than 66% in the last 5 years with total debts rising by 25% in the same period (Depersio, 2016).  The interest coverage ratio which is at 8 however is quite favourable as it shows how many times Verizon current earnings can be used interest in the outstanding debts that it currently has. This shows that in the short term it will be able to pay all its interest that is needed thus shows no sign of insolvency atleast in the foreseable future. . Even though debts are not necessary if they are used for expansion purposes, the use of owners equity is much better and comforting for a business. With the leverage ratio way above its direct competitors, Verizon should try to decrease it unless absolutely necessary as the current cashflows can maintain the operating costs and any minor additional investments that might be required. Recommendation#4 Since the start of 2016, over 25% of the advertisements of the telecommunications industry has been from Verizon.  The “ a better network as explained with colourfu balls” advert alone generated more than 4 billion impressions on television since the start of 2016.The dvert was meant to show how the company dominates in terms of high quality internet which it holds as part of its culture. The airings alone had an estimated media value of over $ 103 million. In 2014 it had spend over $2.5 billion which made it number 5 biggest spender in the United states. Right now Verizon is the leading spender in advertisements in the telecommunicatin industry with over $4.3  (Verizon, 2017)billion spend annual. With the growth of the internet access, online marketing and tv advertisement is more effective than print media. Also all the print media are to some extend going digital. Social media adverttisements in different sites and apps such as facebook, Instagram and twitter has also become more popular especially with the new generation. To maintain the brand name and brand value Verizon has to acquire the lion’s share of the advertisement. Recommendation #5 In the technological world, research and devevopments is key. In 2014, Verizon commissioned the construction of a new data analytics research and development center which will focus on artificial investments and machine-learning activities. Even though rival company leads the research and development space by investing more than more than $ 20.6 billion , Verizon is second with over...