Hughes Electronics Corp., a unit of General Motors Corp., warned Monday that new subscriptions to its DirecTV satellite service in its fiscal second quarter would fall sharply below prior estimates.
Meanwhile, a key competitor, EchoStar Communications Corp., said it continued to outpace Hughes in attracting new customers.
El Segundo-based Hughes, which has been the subject of merger negotiations between GM and media conglomerate News Corp., said it now expects net new subscribers will total about 175,000 in the quarter, down from a prior forecast of 275,000 to 350,000 new subscribers.
Hughes blamed the slowdown on the softening U.S. economy and slower growth in its rural subscriber base, but said the slowdown also would result in reduced marketing expenses.
The company faces competition from cable TV systems with digital services, which offer similar picture quality to satellite broadcasts and hundreds of channels, analysts have said. DirecTV has more than 9.8 million customers.
"Our performance is not satisfactory and is unacceptable to ourselves and to all Hughes shareholders," Hughes Chief Executive Jack Shaw said on a conference call.
Discussions between GM, which owns 32% of Hughes, and News Corp. about a possible sale of the satellite unit have "distracted" management, Shaw said.
Hughes expects second-quarter revenue of $2 billion, meeting previous forecasts. For 2001, revenue will increase 20% compared with the company's previous forecast of 20% to 25%. Hughes will have 10.8 million customers this year, down from its previous forecast of 11 million to 11.2 million.
Hughes shares fell $1, or 4.4%, to $21.60 in after-hours New York Stocks Exchange trading after closing at $22.60, down 50 cents.
EchoStar, the second-biggest satellite-TV broadcaster, said it signed up 1 million subscribers in seven months and is on track to add 1.7 million new users this year.
The Littleton, Colo.-based company now has 6 million customers, compared with more than 9.8 million for DirecTV. EchoStar has been adding customers at a faster rate than Hughes because of free installation programs and promotions, observers said.
Reuters and Bloomberg News were used in compiling this report.