Wunderlich Kicks Off Dish Coverage


Wunderlich Securities has initiated coverage of Dish Network, with a hold rating and a $12 price target for its shares.

In a report Thursday, analyst Matthew Harrigan projected that the second largest satellite provider will shed 380,000 subscribers this year, particularly with the loss of its marketing partner AT&T come Jan. 31. AT&T represented about 15% of Dish Network's gross-subscriber gains last year, according to the report.

AT&T plans to use DirecTV as its exclusive satellite partner effective Feb. 1.

"This is a serous tactical setback [for Dish Network], even with Ma Bell increasingly focused on marketing its in-house U-verse product," Harrigan wrote.

Harrigan also cited Dish Network's TiVo litigation "albatross," namely a Feb. 17 court hearing set on TiVo's allegation that the satellite provider is still infringing on one of its DVR patents, in violation of a 2006 injunction.

In contrast, Dish Network claims that the software "workaround" it downloaded to its set-tops doesn't violate TiVo's so-called "Time Warp" patent. An estimated 4 million DVRs are involved.

The satellite provider has already paid TiVo about $104 million for a jury verdict for patent infringement, and TiVo is now seeking another $220 million in damages for a post-injunctive period through mid-April last year, Harrigan wrote in his report.

If the court ruling in February goes against Dish Network, "We think that TiVo would almost certainly be amenable to Dish paying a licensing fee for its IP (intellectual property) and that Dish would effectively have no choice if the alternative is disabling 4 million DVRs or a radical loss of user functionality," Harrigan wrote.