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Verizon's Earnings and Smart Phone Push?

Ahead of Steve Jobs big presentation tomorrow attention turns to Verizon — a company that many thought would be featured in the Apple event.

Rumors were building that Apple would make the iPhone available on Verizon, but just yesterday in Apple's earnings call execs defended its relationship with AT&T. So what now for Verizon, which announced fourth quarter results today? Can the launch of its service on a Motorola Google Android smartphone last quarter provide the boost that a deal with the iPhone would?

Layoff charges weighed on results — Verizon reported a loss of 23 cents pr share, down from net income of 43 cents in the year-ago period. Without $3 billion in restructuring charges the company would have earned 54 cents per share. Revenue grew 10 percent in the quarter over the year-ago period, and CEO Ivan Seidenberg says a lineup of new devices puts the company in good shape for 2010.

So what do Verizon's numbers say about the Droid? Verizon's tone was moderate — saying that it has been "extremely well received" but that subsidizing the cost of the handset brought down margins. But the more of its subscribers Verizon can get to use smartphones, the more they'll end up spending. Data revenue — what subscribers pay to send texts and access the web — grew 26.6% w in the quarter while overall wireless revenue grew just 5%.

The good news is that Droid helped Verizon secure better-than expected growth in subscribers, more than the prior quarter. This translates to the fact that the Droid is helping Verizon hold onto its subscribers who might otherwise be lured to AT&T by the iPhone. But the Droid is certainly NOT the game changer that the iPhone was for AT&T. Verizon needs its customers to spend lots of time using the fancy web Apps that the iPhone has so many of. We'll see if Verizon can secure an iPhone contract or if Google can create a true iPhone rival for Verizon's network.

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