Ex-Hughes CFO Named DirecTV President

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DirecTV Inc. named former Hughes Electronics Corp. chief financial officer Roxanne Austin its new president last Tuesday, replacing Odie Donald, who joined the company in April 2000 after years in the telephone industry.

Two days later, DirecTV hit a long-awaited milestone: the signing of its 10-millionth direct-broadcast satellite subscriber.

The announcement that didn't
come last week — at least by press time — was the one that industry observers have expected for even longer: news of a sale or spin-off of DirecTV.

Since February, News Corp. has been rumored to be within weeks of heralding a deal to merge its SkyGlobal Networks division with DirecTV parent Hughes Electronics Corp. But now sources predict that it could be the end of the summer before News and Hughes owner General Motors Corp. make their way through the due-diligence process.

Hughes shareholders and others close to the company are also waiting to see whether EchoStar Communications Corp. chairman Charlie Ergen makes an official bid for DirecTV.

Confirming a statement issued in mid-June, DirecTV last week said it expects to add only 175,000 net new subscribers for the second quarter.

DirecTV chairman and CEO Eddy Hartenstein admitted distractions related to the pending sale played a part in the service's slower-than-expected growth in the year's first half.

But other factors were also in play, including an overall slowdown in consumer spending at DirecTV's top retailers.

"It's been a very tough year for consumer-electronics retailers," Hartenstein said.

And DirecTV reseller Pegasus Communications Corp. said several weeks ago that it would not invest as heavily in new video-subscriber acquisitions as it has in the past. That decision has already had a direct impact on DirecTV's new subscriber numbers, Hartenstein said.

While Hartenstein wouldn't say Donald was taking the fall for the second-quarter numbers, he noted that even the former president was not pleased with the results.

Donald could not be reached for comment last week.

Hartenstein said it was Donald's decision to leave the company, that the parting was "amicable," and that Donald would continue to play a role with DirecTV as a consultant, overseeing several projects initiated during his tenure.

In a press release, Hughes CEO Jack Shaw credited Donald with establishing a "customer-first" mind-set throughout all DirecTV departments.

Hartenstein said DirecTV would continue to support the company-wide diversity program that Donald launched earlier this year.

Austin was the first choice to replace Donald as president, Hartenstein said.

"I've had a tremendous passion for the business for a long time," Austin said last week, adding that she, Hartenstein and the rest of the DirecTV management team would make decisions at a very rapid speed.

One of Austin's first charges as president will be to help control subscriber churn, which affects both customer-growth rates and subscriber-acquisition costs, and thus, cash flow.

Naming Austin president was a good move for DirecTV, said Tellus Venture Associates president Steve Blum, especially now that the company needs an executive with CFO skills.

Austin has the skills to run the company as it stands now or after a sale or spin-off, Blum said.

"To pigeonhole Roxanne as [only] a CFO would be a huge disservice," Hartenstein said, noting that Austin has been an active member of the Hughes executive committee.

"Her energy and intellectual capacity are just what we need," Hartenstein added.

When asked whether DirecTV was feeling pressure to improve its financial numbers in anticipation of a sale, Hartenstein replied, "We're putting the pressure on ourselves."

Both Austin and Hartenstein will continue to have some role in any transaction that would sell or spin off Hughes.

"My focus day-to-day is running DirecTV," Austin said.

As to how soon a merger could be announced between DirecTV and SkyGlobal — or DirecTV and EchoStar — it's hard to find anyone willing to venture a guess.

"The story is old," Hartenstein said of the corporate line that GM hopes to do a transaction sooner rather than later. "Everyone is getting sick of it."

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