Moffett Downgrades Dish Stock


Saying Dish Network’s “business has deteriorated sharply,” Sanford Bernstein analyst Craig Moffett Wednesday downgraded the satellite provider’s stock to “underperform” from “market perform.”

In his report, Moffett cited Dish Network’s continued weak operations, declining cash flow, “worsening satellite-sector headwinds, and significant company-specific legal and contractual risks.”

Dish Network, for the first time in its history, saw “negative” customer growth, losing 25,000 subscribers in the second quarter, Moffett noted in his report.

“As we have argued for the better part of a year, with its lower-end positioning, Dish appears to be simply in the wrong place at the wrong time in this macro-economy,” Moffett wrote.

He also pointed out that “a Sept. 4 contempt hearing in the TiVo case poses potentially huge risks.” Dish Network is embroiled in an ongoing legal fight with TiVo, which won a $74 million jury verdict – now up to $94 million with interest – in 2006 against the satellite company for patent infringement involving set-top technology. 

Dish Network is appealing the verdict, and TiVo claims that the satellite provider has failed to comply with an injunction that mandates it turn off its infringing DVRs.

 A hearing on that is set for Sept. 4, and Dish Network CEO Charlie Ergen maintains that his company installed new software in its DVRs and they are no longer infringe with TiVo’s patents.

Moffett also said another rish for Dish Network is that it could lose its deal with AT&T by year’s end. The telco has notified Dish Network that it will no longer continue reselling Dish satellite service when their 2003 contract expires the end of the year.

AT&T is evaluating whether to do a new reselling deal with Dish Network, or with rival DirecTV, for 2009.