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Vodafone: huge earnings? or biggest ever loss? Which?

You'd be forgiven for a sense of dizziness over the cornflakes today. First, it's great news! - Vodafone "unveiled plans to return an extra 3 billion pounds to shareholders," said the Reuters report. And at the same time Bloomberg was saying reporting that Vodafone posted "the biggest annual loss in European corporate history on writedowns."

Nonsense like this can only be explained by corporate politics. The "loss" is actually a bubble bursting. Vodafone has been buying other phone companies around the world for years, and paying over the odds for them. Now, reality is starting to filter into the valuations.

And Vodafone - which actually made huge operating profits last year - wiped them all out by re-assessing what its overseas holdings are truly worth, and writing them down by £23.5 billion. Without that, the profits would have been £1.6 billion.

Stock markets seem to have fallen for it. Bloomberg called the action "appeasement" saying: "Chief Executive Officer Arun Sarin, under pressure from shareholders to deliver a clear strategy as growth slows, is increasing payouts to appease investors."

Last year's profit was £6.41 billion, so there's a lot of appeasement to do.

At stake is Sarin's job. Most insiders say they expect him to be forced to sell Vodafone's stake in US operator Verizon "and without the American connection, it's hard to see what value Arun brings to the Board," said one digital evangelist recently. "He just annoys British analysts and investors, but the same arrogant attitude goes down a storm in the US stock markets."

That fact may explain why today's announced results highlight "improved profits" from the Verizon stake. Sarin needs the market to stop asking him to sell his American stake.

  Tags: Vodafone, mobile, cellphone, and Arun Sarin