Hughes Posts Loss Despite DirecTV Gains

Hughes Electronics Corp. on Wednesday reported a fourth-quarter loss as higher costs more than offset record subscription growth at its DirecTV unit, the nation’s leading satellite television service.

The loss of $231.8 million translates to 58 cents per share--a penny better than the 59-cent loss that analysts surveyed by First Call/Thomson Financial had predicted. It compares with earnings of $123.1 million, or 32 cents a share, a year earlier.

Sales rose 54%, to $1.7 billion, from $1.11 billion.

The El Segundo-based company’s costs are rising as part of its effort to build the DirecTV business, which added 225,000 customers in December alone, helped by federal legislation enacted after Thanksgiving allowing satellite-TV companies to broadcast local channels.

For all of 1999, DirecTV added 1.61 million subscribers, 39% more than in 1998, for a total of 8 million subscribers.

“Clearly, the total driver is DirecTV,” said Vic Hawley, a money manager at Los Angeles-based Reed Conner & Birdwell Inc., which owns about 200,000 shares of Hughes, a subsidiary of General Motors Corp.

DirecTV accounts for roughly 80% of the value of Hughes, which restructured the company last week to focus solely on service businesses such as pay television and high-speed Internet access. As part of the restructuring, Hughes agreed to sell its satellite manufacturing business to Boeing Corp. and to take a $272-million pretax charge from discontinuing its mobile cellular and other telephone operations and for depreciation and amortization expenses related to its 1999 acquisition of the U.S. Satellite Broadcasting Co. and Primestar satellite TV business.

GM’s Class H shares, which track the performance of Hughes, rose $2.25 a share to $121.25 in New York Stock Exchange trading. They’ve more than doubled in the past year, as a result of DirecTV’s growth, speculation that GM might spin off the pay-TV unit, and the new powers to sell local channels.

For the year, Hughes lost $291.3 million, or 77 cents a share, compared with earnings of $250.7 million, or 68 cents a share in 1998. After the accounting adjustment, the 1999 loss was $270.3 million compared with earnings of $271.7 million for 1998.

Revenue for the year was $5.56 billion, up 60% from $3.48 billion in 1998.

At a Glance

* Pacer Technology, the Rancho Cucamonga-based maker of Super Glue and other industrial-strength adhesives, reported an operating income for its fiscal second quarter of $270,000, or 0 cents per share, compared with $942,000, or 3 cents, a year ago. Revenue fell to $10.3 million from $11.8 million.

The company blamed the decline in operating results in part on expenses incurred in defending itself in the quarter against a group of dissident shareholders who waged an proxy fight that eventually proved unsuccessful.