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Hughes beats 1Q target
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April 17, 2001: 3:13 p.m. ET
Satellite television unit of GM boosts earnings goals; mum on spin-off plans
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NEW YORK (CNNfn) - Hughes Electronics Corp., the satellite television and broadband service provider that General Motors Corp. is expected to sell soon, posted better-than-expected first-quarter results Tuesday despite thinner profit margins.
Hughes also boosted some of its earnings targets for 2001, but continued to stay quiet about a possible deal to sell the company or spin it off to shareholders.
The company, a wholly-owned subsidiary of GM with its own tracking stock, reported earnings before interest, taxes, depreciation and amortization, known as EBITDA, of $113.2 million, or 9 cents per share of tracking stock, and an EBITDA margin of 6 percent of revenue. That's down from the EBITDA of $152.7 million, or 12 cents a share, with a margin of 9 percent from a year ago.
Analysts surveyed by earnings tracker First Call forecast EBITDA per share of 6 cents in the most recent quarter. EBITDA is the most closely watched measure of the company's financial performance.
Hughes (GMH: up $0.48 to $19.62, Research, Estimates) posted a net loss of $97.9 million, or 8 cents a share, compared with a loss from continuing operations of $108.3 million a year earlier. First Call had forecast a loss per share of 12 cents in the latest period.
In a conference call with financial analysts and reporters Tuesday afternoon, Hughes executives boosted 2001 guidance for EBITDA by $50 million to a range from $550 million to $650 million.
Hughes said the EBITDA for its primary growth engine, the U.S.-based satellite television service DirecTV, will rise by $25 million to a range from $325 million to $425 million.
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DirecTV expects to see its net new subscribers in the United States to grow by 275,000 to 300,000 in the second quarter and 1.5 million to 1.7 million for the full year 2001. DirecTV had a 9.8 million U.S. subscribers at March 31.
Hughes' revenue increased 11 percent to $1.9 billion from $1.7 billion a year ago. All the gain came from direct broadcast, leasing and other services, as product sales slipped to $194.8 million from $230.7 million a year earlier. Its DirecTV satellite television service accounted for most of the revenue, about $1.3 billion.
"Despite uncertain economic conditions, we activated a record number of DirectTV U.S. customers on a gross basis for the fourteenth consecutive quarter," CEO Michael Smith said.
Hughes considering options
In the conference call, executives said they were still evaluating a variety of alternatives to boost shareholder value, including a possible sale of the company or spin-off to shareholders.
While investors have long expected GM (GM: up $0.22 to $53.22, Research, Estimates) to sell Hughes, the world's leading automaker didn't confirm it planned to shed the company until last fall. It now is in talks on a possible sale of DirecTV to News Corp. (NWS: down $0.29 to $33.50, Research, Estimates), the media conglomerate that wants to link the company with its Sky Global Networks satellite television system.
Lachlan Murdoch, News Corp.'s deputy chief operating officer, described the talks as "extraordinarily difficult" at an analysts' conference earlier this month. The Wall Street Journal reported last month that Michael Smith has begun approaching potential investors about taking a large stake in the satellite broadcaster and then spinning it off in hopes of blocking an acquisition bid from News Corp. 
- from staff and wire reports
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