Hughes Loss Narrows as Revenue Climbs 10%

Hughes Electronics Corp. said Monday that its first- quarter loss narrowed and that its revenue rose more than expected as a result of continued cost savings and subscriber growth at its DirecTV satellite unit.

Hughes increased its financial estimates for the year as a result of the performance, which follows last week’s agreement by News Corp. to buy a 34% stake in the El Segundo-based company for virtual control of the nation’s satellite TV leader.

Hughes reported a net loss of $50.9 million for the quarter ended March 31, compared with a loss of $837.7 million a year earlier. Hughes is a tracking stock of its parent, General Motors Corp., and therefore does not report earnings per share.

Last year’s first quarter was adversely affected by new accounting rules for valuing goodwill. In adhering to the new rules, Hughes took a $557-million write-down in last year’s first quarter related to the value of its wholly owned subsidiary DirecTV Latin America, which sought bankruptcy protection last month because of currency devaluations and suffered a 7% drop in subscribers for the quarter. Hughes also took a charge of $108 million for its DirecTV Broadband operation, which shut down in February.

Despite the distractions of being up for sale for almost three years, Hughes has reported several quarters of improvement at DirecTV and beat Wall Street expectations for the first quarter. The company said revenue increased 10% to $2.2 billion; DirecTV reported revenue of $1.8 billion, up 13.3% from a year earlier.

DirecTV added 275,000 new subscribers in the quarter and did a better job retaining customers. The unit’s churn -- the rate at which customers drop the service -- fell to 1.5% a month from 1.6% in the previous period.

DirecTV ended the quarter with 11.42 million customers in the United States.

Yet Hughes management said a sputtering economy and DirecTV price increases in March could slow subscriber growth in the second quarter.

Hughes said it expected to add 800,000 to 850,000 subscribers for the year, a revision from the 750,000 to 800,000 previously expected.

In a conference call with analysts Monday to discuss quarterly earnings, DirecTV President Roxanne Austin said most new customers were coming from cable and that 40% had tried new digital cable offerings aimed at blunting satellite TV’s digital advantage.

“Cable is not delivering on the digital promise,” she said.

DirecTV also reported a $2.40 increase in subscribers’ average monthly spending, to $59.10, as a result of increased purchases of local channels and premium packages. DirecTV’s customers tend to be upscale early adopters, making its subscriber base the envy of the pay-television industry.

The strong first-quarter performance prompted Hughes to increase its full-year guidance. Hughes expects revenue for 2003 of $9.5 billion to $9.6 billion, revised from its previous forecast of $9.3 billion to $9.5 billion.

GM Hughes shares rose 33 cents to $10.85 on the New York Stock Exchange.