Net Loss Doubled, Hughes Says
Satellite television provider Hughes Electronics Corp. said Monday that its net loss more than doubled during the second quarter, hampered by significantly lower-than-expected net subscriber additions, a slowing U.S. economy and losses from its satellite subsidiary.
The company, which warned last month that its quarterly results would fail to 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,” Hughes Chief Executive Jack Shaw said in a news release.
Hughes warned that it expects to report third-quarter revenue 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 previously expected 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.
Hughes, along with parent General Motors Corp., has been negotiating for the sale of DirecTV to Rupert Murdoch’s News Corp. since last fall. The company last month attributed its shortfall in new subscribers to a slowdown in the U.S. retail market and a management distracted by 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 to fruition.
General Motors H Class stock, which reflects the performance of Hughes Electronics, closed off $1.59 at $18.86 on the New York Stock Exchange.
Hughes said second-quarter total revenue rose to $1.99 billion from $1.84 billion in 2000, and its net loss widened to $156.5 million compared to a net loss of $69.1 million in the year-ago quarter. The DirecTV U.S. unit added 745,000 total new subscribers and 175,000 net new subscribers, as expected, and reported revenue of $1.35 billion, up from $1.13 billion a year ago.
