DirecTV in the News

Hughes Reports First Quarter Loss

LOS ANGELES (Reuters) -- April 17, 2001 -- Satellite service provider Hughes Electronics Corp. on Tuesday reported a wider first-quarter net loss as growth at its DirecTV television service was undercut by operations at other satellite units.

Hughes offered no new information about possible plans for an outright sale or a partnership with another company, or spinning off Hughes in public offering. For months, Hughes and parent General Motors Corp., have talked about a sale with various parties, including Rupert Murdoch's News Corp Ltd. (NCP.AX) (NYSE:NWS - news), but no deal has materialized.

Chief Financial Officer Roxanne Austin told Wall Street analysts and reporters on a conference call Tuesday that the company continued to evaluate a broad range of alternatives.

"We are considering strategic and financial investments in Hughes from a broad range of interested parties,'' Austin said. ''Whether and when we might be able to announce a transaction remains uncertain.''

Hughes' net loss grew to $105.3 million in the first quarter from $81.9 million a year ago. Revenues rose to $1.89 billion from $1.70 billion in 2000.

Cash flow from operations -- earnings before interest, taxes, depreciation and amortization -- fell to $113.2 million from $152.7 million last year. EBITDA is a measure of performance in capital-intensive businesses in which start-up costs are high, such as satellite businesses.

Hughes, which is based in the Los Angeles community of El Segundo, also lowered its growth target for DirecTV's net new U.S. subscribers due to the slowing economy, and said it would manage the costs of attracting new subscribers more closely.

Austin said on the conference call that Hughes expected a gain of 1.5 million to 1.7 million net new subscribers in 2001. That figure is down from previous guidance of 1.5 million to 2 million. As of March 31, DirecTV had 9.8 million U.S. subscribers, up 18 percent from a year ago.

Reaction on Wall St. was generally positive as Hughes first-quarter earnings hit targets and DirecTV's U.S. subscriber growth for the quarter proved to be a key factor.

David Kestenbaum, an analyst at ING Barings, called the report "positive.'' He said the 340,000 net new subscribers in the United States was at the lower end of a range of estimates, but there had been talk on the Street of even lower growth.

Hughes previously targeted DirecTV's U.S. net subscriber growth in the range of 325,000 to 400,000 for the quarter.

Looking ahead, CFO Austin said Hughes was lifting overall EBITDA targets for 2001 by $50 million to a range of $550 million to $650 million, and it raised DirecTV's EBITDA guidance by $25 million to $325 million to $425 million.

Hughes attributed the first-quarter net loss to several factors, including reduced contributions from its PanAmSat Corp. division, changes to leasing for DirecTV set-top boxes in Latin America, the termination of DirecTV Japan and changes in operations at its Hughes Network Systems group.

The DirecTV unit added 840,000 total new subscribers, including 101,000 net new subscribers in Latin America.

In the U.S., DirecTV's first-quarter sales grew 25 percent to $1.32 billion from $1.06 billion last year, and EBITDA grew 61 percent to $50 million from $31 million last year.

In Latin America, where DirecTV subscribers now total 1.4 million, sales grew to $165 million from $114 million last year. But the unit widened its negative EBITDA to $44 million from last year's $38 million due to high marketing costs.

PanAmSat, which is 81-percent owned by Hughes, and Hughes Network Systems both felt the sting of reduced EBITDA. Among the factors were difficult comparisons to last year and the discontinuation of some business practices.

General Motors Class H shares, reflecting Hughes operations, rose 92 cents to $20.06 Tuesday on the New York Stock Exchange. In recent months, Hughes shares traded up or down, based on reports of an acquisition deal. They hit a 52-week peak of $38 early last October.