In the second management shake-up in two months, Hughes Electronics Corp. on Tuesday named a new president for its DirecTV unit in an effort to shore up disappointing performance at the satellite TV operation.
The El Segundo-based company named Chief Financial Officer Roxanne Austin president and chief operating officer of DirecTV, the largest division of Hughes. She will report to DirecTV Chairman and Chief Executive Eddy Hartenstein.
Austin succeeds Odie Donald, who resigned after only 14 months, having failed to deliver on promises of higher subscriber growth and lower customer turnover.
Since its 1994 launch, DirecTV has become the nation's leading satellite television provider, with 10 million customers. But DirecTV warned Wall Street this month that it would add only 175,000 subscribers this quarter, well below the 350,000 promised. That is half as many as DirecTV's smaller rival, EchoStar Communications Corp., which reiterated this month that it is on track to add 350,000 subscribers this quarter, ending Saturday.
"Management changes may have been warranted given the recent fundamental performance of the company," said Vijay Jayant, an analyst at Morgan Stanley.
Hughes said this month that a slowing economy is hurting DirecTV's growth. At the same time, CEO Jack Shaw acknowledged that ongoing merger negotiations with News Corp. might have preoccupied top management.
News Corp. has been talking about merging Hughes with its satellite operations for 10 months. Heavily chronicled by the media, the negotiations created management turmoil within Hughes as well as its parent company, General Motors Corp.
In May, Michael Smith was ousted as chairman and CEO of Hughes after trying to block the proposed sale of the company to News Corp. Smith believed Hughes shareholders were entitled to a bigger premium than News Corp. was prepared to give. Smith sought alternative buyers, such as rival EchoStar.
Austin, 40, is a close ally of Hartenstein's, having served as CFO since 1997. She joined Hughes in 1993 and was treasurer, chief accounting officer and controller before rising to CFO.
She is succeeded as Hughes CFO by Michael Gaines, 43. Gaines was previously corporate vice president of finance and treasurer for Hughes.
Smith recruited Donald, a 30-year executive with BellSouth Corp., to the company, overruling Hartenstein, who wanted Austin to be president, according to company sources.
Wall Street was taken aback by Donald's appointment, expecting Hughes to recruit a high-visibility executive from either the cable or satellite industry with experience driving subscription growth.
Hartenstein characterized Donald's resignation as a mutual decision. He said the company is shifting its approach to sales and marketing to lower customer acquisition costs, drive subscription growth and reduce customer churn.
"There's no question that we had a less-than-stellar first part of the year," Hartenstein said.
Indeed, in the first quarter, DirecTV added only 340,000 subscribers, compared with EchoStar's 460,000 additions.
Wall Street analysts say if it wasn't for the merger negotiations, Hughes stock, which has hovered in the $20-a-share range for months, would trade in the teens. Hughes shares closed Monday at $20.03, down 2 cents on the New York Stock Exchange.
The stock is down about 12% since the company warned Wall Street of weaker-than-expected subscriber growth and down about 47% from a 52-week peak of $38 in October.