Hughes Electronics Corp. announced at the close of the market Monday
afternoon that it was revising its guidance for subscriber growth of its DirecTV
Inc. direct-broadcast satellite service.
The company projected that it would add only 1.3 million new subscribers for
the year, rather than the 1.5 million or more it originally predicted. The
company was also expected to have hit the 10 million-subscriber mark earlier
this spring, but it is now seen reaching that goal by the end of the second
Newly named Hughes CEO Jack Shaw admitted that the drawn-out talks to merge
the company with News Corp.'s SkyGlobal Networks division have been a major
distraction and had a negative impact on the company's performance. Shaw said he
has asked DirecTV global chairman Eddy Hartenstein to jump back into running the
day-to-day business, in addition to his recent role in the merger talks.
DirecTV also reported that its subscriber-acquisition costs for the second
quarter were expected to rise to $575. Several factors contributed to the
increased costs, including subsidies paid to retailers for multiple boxes per
household and the increased activity of hackers.
To help discourage hackers, Hartenstein said, DirecTV recently changed its
agreement with RadioShack Corp. to pay commissions based on service activations,
rather than just equipment sales.
DirecTV plans to stimulate sales through more targeted promotional campaigns
in local markets where cable has risen rates dramatically and where DirecTV
offers local broadcast signals.
The slowing economy hit DirecTV's sales for the quarter. Consumer-electronics
chains in recent weeks have reported lower-than-expected retail sales. In
addition, DirecTV is seeing fewer sales in rural markets from its National Rural
and Telecommunications Cooperative partners, most notably Pegasus Communications
DBS rival EchoStar Communications Corp. said earlier Monday that it signed
its 6 millionth Dish Network customer. Hartenstein noted that the sales
differences might be attributed to the differences in the two companies'
distribution models. DirecTV plans to emphasize alternate means of distribution,
including independent dealers, Blockbuster Inc. and a direct-sales-lease model
from DirecTV's home-services division.