Economy blamed lower-than-expected quarter
Hughes Electronics, still in the midst of painfully slow merger negotiations with News Corp., said late Monday that subscriber growth for its flagship DirecTV service will be much weaker than expected for the second quarter and the year due to a stuttering economy.
The revised forecast knocked Hughes shares down 2.2% to $22.60.
Sales of DirecTV systems at electronic retailers have been sluggish, said Hughes CEO Jack Shaw, as have subscriptions in rural markets. Shaw said that means DirecTV, the nation’s largest satellite provider, plans to get a lot more aggressive selling the service against cable, its main competitor.
Marketing tactics include “aggressively targeting cable customers who have experienced large rate increases or poor service,” he said, and “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.”
Company announced after the market closed that it expects its net gain in U.S. subs will be about 175,000 for the quarter ending in June, down by as much as 46% from a prior forecast of a 275,000-350,000 gain.
But it also said that a lower than anticipated subscriber count means the company will spend less to reach those subs — which will result in higher than expected cash flow for the quarter and the year.
Hughes is also adjusting projections for DirecTV Latin America as it “places a greater emphasis on reducing churn and attracting long-term profitable subscribers.” That also means fewer subs and lower cash flow losses there.