Following a disappointing second-quarter earnings report Monday, the share
price of Hughes Electronics Corp. stock fell more than 7 percent.
In an analysts' call Monday, Hughes executives admitted that the problems
with DirecTV Inc. customer churn were more challenging than they had projected
just last month, when the company gave new guidance for this year's subscriber
DirecTV is now projecting that it will add 1.1 million net new DirecTV
customers in the United States this year, down from the 1.3 million projected in
'All great new businesses reach an inflection point,' DirecTV chairman Eddy
Hartenstein said, 'and we are at that point.' He added that he was committed to
getting the company's growth back on track.
Satellite-signal theft, a slowdown at consumer-electronics retailers and poor
customer service were counted among the reasons for the lower projected
DirecTV president Roxanne Austin announced a 'war on churn' and promised that
analysts would see an improvement in subscriber churn in the second half of the
year. The company plans to spend more money to beef up the performance of its
call centers, most of which are outsourced.
But in most areas of the business, DirecTV will try to cut costs. 'The way we
do business today is too expensive, and we're going to make tough changes,'
Austin said. 'There will be management changes.'
Hughes CEO Jack Shaw acknowledged that the company was 'rounding the corner'
in its talks with News Corp., but he would not take analysts' questions
regarding the potential merger. Shaw did note that whether or not a transaction
takes place, Hughes still has an obligation to run the business in the interest
of its shareholders.
Any transaction to merge DirecTV with another company 'would take the better
part of a year' to pass regulatory approval, DirecTV chairman Eddy Hartenstein