Verizon's CEO's current strategy is facing criticism and is being called a likely failure.
Cost-cutting efforts might not be enough to turn the tide for Verizon.
According to a Seeking Alpha analysis, Verizon's current layoffs are unlikely to reverse its decline. The firm suggests that CEO Dan Schulman attempted a similar strategy at PayPal, his previous company, which did not produce significant gains.
Instead of maximizing existing resources, Verizon is resorting to significant actions, including dismissing 13,000 workers and seeking to acquire EchoStar’s AWS-3 spectrum.
The company intends to reduce its non-union workforce by 20 percent, with the aim of funding improvements to the customer experience.
However, the layoffs might be ineffective because:
The savings from the laid-off employees may represent a small portion of Verizon's total yearly expenses.
Workforce reductions may cause disruption, diverting management's attention away from business development and towards reassigning tasks.
PayPal implemented large-scale layoffs while Schulman was CEO, but this did not appear to produce the intended turnaround.
Verizon needs to explore strategies beyond simple cost-cutting to expand its business and draw in new subscribers.
Despite significant investment in network improvements, the carrier has not seen substantial results. While broadband is a new source of revenue, it is not very profitable. The carrier has lost 414,000 subscribers this year.
Schulman's statements about improving customer satisfaction and efficiency seem to be a continuation of former CEO Hans Vestberg's strategy at a reduced cost.
More substantial changes may be on the horizon.
In addition to layoffs, Verizon is taking other steps to attract customers. The company recently revealed deals without trade-ins. Price cuts have not been ruled out and could happen next year, especially if the carrier experiences its fourth consecutive quarter of customer losses.
Schulman has not been in his position long enough to fully implement his vision for Verizon, so it may be best to wait before evaluating his strategy.
Should Verizon be acting more quickly?
It appears that Verizon's biggest fear, losing its top position, has already occurred. The company could face even greater challenges if it does not make significant adjustments, but this does not necessitate poorly considered actions. Schulman is moving cautiously, possibly assessing the situation before making any major changes.