Hughes Expects Fewer Second Quarter Net Subscribers

EL SEGUNDO, CALIF.— Blaming economy-driven slower-than-expected sales at consumer electronics retailers, the primary outlets for distribution of its DirecTV system, Hughes Electronics has issued new second-quarter and full-year financial guidance.

The provider of digital TV entertainment, broadband services, satellite-based private business network, and global video and data broadcasting expects that its U.S. DirecTV business will add fewer net subscribers than originally anticipated for the second quarter and full year.

Net subscriber guidance for the second quarter has been reduced to 175 thousand, down from the earlier guidance figures of 275 thousand to 350 thousand subscribers. For the full year, net subscriber guidance has been reduced to 1.3 million, down from 1.5 million to 1.7 million.

Earnings before interest, taxes, depreciation and amortization (EBITDA) guidance has been increased because the lowered subscriber projections result in lower subscriber marketing expenses.

Revised EBITDA guidance for DirecTV in the second quarter has been increased to $75 million, compared with earlier guidance of $60 million to $75 million.

EBITDA guidance for DirecTV for the full year 2001 has been increased to $350 million to $425 million, compared with earlier guidance of $325 million to $425 million.

Revised revenue guidance for DirecTV in the second quarter remains at $1.35 billion to $1.4 billion, while revised guidance numbers for the full year 2001 place revenue numbers for DirecTV at $5.5 billion to $5.7 billion, compared with $5.6 billion to $5.8 billion in the prior full-year 2001 guidance.

Revenue guidance for the second quarter at Hughes overall remains at $2 billion, but full-year 2001 guidance has been reduced to 20 percent growth, down from 20 percent to 25 percent.

Overall Hughes EBITDA guidance for the second quarter remains constant at $80 million to $100 million, while full-year numbers have been raised to $575 million to $650 million, up from $550 million to $650 million.

"To combat the slower retail sales in the United States, we are taking aggressive steps to strengthen the performance of all our distribution partners, who include independent retailers and direct sales, in addition to our national consumer electronics retailers and Blockbuster," said Jack A. Shaw, Hughes CEO.

"We have implemented a variety of market tactics, including aggressively targeting cable customers who have experienced large rate increases or poor service," said Shaw. "We are also shifting our advertising and marketing focus to the more than 60 million TV households where DirecTV offers local channels and is truly a replacement for cable."