DirecTV in the News

Hughes Net Loss Doubles in Second Quarter

CHICAGO (Reuters) - July 17, 2001 - Satellite service provider Hughes Electronics Corp., which is negotiating to sell its flagship DirecTV business to Rupert Murdoch's News Corp., said Monday its net loss more than doubled in the second quarter, due to significantly lower-than-expected net subscriber additions, a slowing U.S. retail market and losses from its satellite subsidiary.

Hughes, which warned last month that its quarterly results would not meet expectations, also reported a lower cash flow from operations for the quarter. Hughes cut its estimates for the full year, citing the slow U.S. economy.

Despite the difficult current environment, Hughes officials said they are reviewing all of the company's businesses in order to get their financial position solidified.

"My No. 1 operational objective is to get the company back on track and meet or exceed these financial commitments. In the coming weeks, we will be sharing with you the specific operational and structural changes that will enable us to meet this objective," Jack Shaw, Hughes's chief executive, said in a news release.

Hughes warned that it expected to report third-quarter revenues of $2.1 billion and cut its full-year revenue outlook to about $8.3 billion from about $8.76 billion.

It also cut its full-year cash flow projections to a range of $450 million to $500 million from a previous range of $575 million to $650 million.

"It reflects the economy," Tim Ghriskey, fund manager of the Dreyfus Fund, said. "Weaker economic activity lowers telecom traffic over satellites and that (satellite) market has been somewhat elusive. Past guidance has indicated rapid growth and that just hasn't come to pass yet," he added.

Hughes trimmed its full-year expectations for net subscriber additions at DirecTV U.S. to about 1.1 million from 1.3 million, which had just been cut last month from a previous range of 1.5 million to 1.7 million. It also expects the unit to now report cash flow between $250 million to $300 million instead of $350 million to $425 million.

DirecTV is Hughes' main growth unit

Hughes, along with parent General Motors Corp., has been negotiating for the sale of DirecTV to Murdoch's News Corp since last fall. Hughes last month attributed its shortfall in new subscribers to a slowdown in the U.S. retail market and the distraction of merger talks.

Its rival, EchoStar Communications Corp., had also expressed interest in acquiring DirecTV, but EchoStar has pulled its plans according to a news report Monday, bringing a deal between Hughes and News Corp. one step closer.

Spokeswomen for GM and Echostar declined to comment on the report in Monday's Wall Street Journal. A GM spokeswoman said the company remains focused on its negotiations with News Corp. and in a conference call Shaw also said talks with News Corp. were continuing.

"We're working to achieve resolution in this matter quickly and with as little impact on the ... business as possible. I believe GM has used the phrase we're rounding the quarter. I agree with this characterization," Shaw said.

General Motors H Class stock, which reflects the performance of Hughes Electronics, closed off $1.59, or 7.8 percent, at $18.86 on the New York Stock Exchange (news - web sites) Shares have underperformed the Standard & Poor's 500 by about 31.4 percent over the past year.

El Segundo, California-based Hughes said second-quarter cash flow from operations, or earnings before interest, taxes, depreciation and amortization (EBITDA), fell to $82 million from $179.6 million a year earlier. That was in the low end of Hughes' guidance of $80 million to $100 million.