Verizon Slices Workforce, Downgrades Value of Oath Business Unit
Verizon said earlier this week that 10,400 of its employees have accepted buyouts as part of what is calls a “voluntary separation program” and disclosed a $4.6 billion charge related to struggles in Verizon's Yahoo/AOL business division.
The staff cuts -- nearly seven percent of its workforce --will affect "U.S.-based management employees" across multiple business segments, according to the carrier.
Verizon said on Monday that the buyouts would “be seamless to our customers"
[Related: Channel Consistency Will Be Crucial As Verizon CEO McAdam Set To Retire, CTO To Take Over]
Verizon said that its media subsidiary, Oath -- which is the combination of its AOL and Yahoo assets that it acquired in 2015 and 2017, respectfully -- is less valuable than it thought. The carrier had valued Oath at $4.8 billion, but on Tuesday, Verizon revealed in a regulatory filing that it will take a $4.6 billion goodwill impairment charge for the failing business unit. The goodwill charge represents the current market value of the assets and liabilities of an acquired company subtracted from the price that was paid to buy the company.
In its most recent filing, Verizon said: "Verizon's Media business, branded Oath, has experienced increased competitive and market pressures throughout 2018 that have resulted in lower-than-expected revenues and earnings. These pressures are expected to continue and have resulted in a loss of market positioning to our competitors in the digital advertising business. Oath has also achieved lower-than-expected benefits from the integration of the Yahoo Inc. and AOL Inc. businesses."
The news this week comes after the Basking Ridge, N.J.-based carrier earlier this fall offered early-retirement buyouts to thousands of its employees, including all management employees, in an effort to trim costs by about $10 billion by 2021. Verizon said it issued voluntary buyouts to 44,000 employees, and that 10,400 employees have so far accepted the buyout offers and will leave the company by June 2019.
Verizon CEO Hans Vestberg said in August that the carrier will be focusing on building out its strong wireless network and next-generation networking technologies, including 5G.
Verizon had a global staff of 155,400 employees at the beginning of 2018. The cuts come one year after the Tax Cuts and Jobs Act was signed into law representing the largest one-time tax reduction in U.S. history. U.S.-based carriers, at the time, including AT&T, Comcast, and Verizon, said the tax reform will help make room for additional investments on employees.
Two solution providers that spoke to CRN under the condition of anonymity said that the tax cuts haven’t created any noticeable change in terms of investment in new positions in their channel organizations since last year.
Verizon, for its part, said in early 2018 that it would save $3.5 billion to $4 billion because of the federal tax cut. A spokesperson for the company said the firm would use the tax savings to pay down corporate debt, contribute to pension plans, donate up to $300 million in Verizon Foundation philanthropic initiatives, and grant “almost all” of its employees 50 shares of Verizon stock.
A Verizon spokesperson said that through the first three quarters of 2018, the company has reduced debt by $4.2 billion, and made discretionary contributions of $1.7 billion to employee benefit programs. “We've also returned $7.3 billion to shareowners in dividends, and continued to invest heavily in our networks (more than $12 billion in capex through the end of 3Q),” the spokesperson said.