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Hughes Electronics cuts costs and losses
GM's TV provider trims sales forecast
October 15, 2002
BY HOLLY M. SANDERS
BLOOMBERG
EL SEGUNDO, Calif. -- Hughes Electronics Corp.'s third-quarter loss narrowed to $13.6 million after the largest U.S. satellite-television broadcaster added customers and reduced expenses.
The company cut its 2002 sales forecast, citing lower results at its Latin American unit. Shares of El Segundo-based Hughes fell 24 cents to $8.52 on the New York Stock Exchange. The stock has fallen 45 percent this year.
The quarterly loss narrowed from $227.2 million a year earlier, the company said. Hughes, a unit of Detroit-based General Motors Corp., didn't report per-share figures. Sales rose 5.3 percent to $2.21 billion from $2.1 billion.
"I imagine people are a little disappointed with the results," said Bill Jacobs, an analyst with Harris Associates LP, which held 10.2 million Hughes shares as of June. "Plus, with the deal getting killed, people are asking, 'Why should I be in this?' "
Hughes, whose purchase by rival EchoStar Communications Corp. has been blocked by federal regulators, trimmed its full-year revenue forecast to a range of $8.9 billion to $9 billion from $9 billion to $9.2 billion. The company blamed falling currencies against the U.S. dollar at DirecTV's Latin American business, as well as the slumping telecommunications market.
Hughes is likely to face continued competition from EchoStar following last week's decision by the Federal Communications Commission. EchoStar's Dish Network is adding subscribers faster than DirecTV and has encroached on some of its retail outlets, analysts said.
In a conference call, Hughes executives said that, should the merger fail, they intend to use the $600-million breakup fee and the $2.7 billion in proceeds from the sale of commercial satellite-operator PanAmSat Corp. to pay down debt.
The company expects the U.S. DirecTV unit to add 1 million to 1.05 million subscribers this year, down from a previous forecast of 1.2 million. DirecTV had 9.2 million U.S. subscribers at the end of the third quarter. DirecTV Latin America had 1.6 million.
Hughes said 2002 earnings before interest, taxes, depreciation and amortization will be at the low end of a forecast of $750 million to $850 million.
"It's confirmation that perhaps it's a more difficult business than people were expecting," said Janco Partners Inc. analyst Matthew Harrigan, who rates the stock a "buy" and doesn't own any shares.
DirecTV added 206,000 subscribers in the United States in the third quarter. That was in line with Hughes's reduced forecast last month of 200,000 to 210,000, after the company cut off service to 50,000 customers.
The company said some of those customers were using counterfeit cards that can be plugged into set-top boxes, giving them access to premium programming without paying for it.
In the most recent quarter, DirecTV's U.S. sales climbed 19 percent from a year earlier as average monthly revenue per subscriber rose to $59.20 from $58.10.
Hughes expects to add 250,000 to 300,000 subscribers this quarter, with results helped by holiday shopping.
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