Dish Reports Quarterly Profit That Trails Estimates on Customer Losses
Dish Network Corp. (DISH), the second- largest U.S. satellite-television provider, reported profit that trailed analysts’ estimates after losing subscribers.
Earnings excluding some items were 75 cents a share, the Englewood, Colorado-based company said today in a statement. Analysts projected 79 cents, the average of estimates compiled by Bloomberg.
A sluggish economy may hurt Dish more than its competitors, said Ryan Vineyard, an analyst at RBC Capital Markets in New York. Dish targets lower-income subscribers with cheaper packages than DirecTV, its larger satellite rival, which used promotions to lure customers last quarter.
“Dish was not aggressive in the marketplace, and unlike DirecTV, Dish did not respond to the promotional environment,” Todd Mitchell, an analyst at Brean Murray Carret & Co. in New York, said in a note to clients. He recommends buying the stock.
Dish fell 6 cents to $22.58 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have risen 15 percent this year.
The company lost 135,000 subscribers in the quarter, compared with DirecTV (DTV)’s gain of 26,000 U.S. customers. Jason Bazinet, an analyst at Citigroup Inc. in New York, estimated a loss of 60,000 for Dish. In the first quarter, Dish gained 58,000 customers, and in the year-earlier period it lost 19,000.
Chief Executive Officer Joseph Clayton said on a conference call today that Dish cut back on promotions and marketing to lower-income, less profitable customers. Dish has had an image of being “cheap, cheap, cheap” to consumers and will attempt to eliminate that message with advertising that showcases the company’s technology, Clayton said.
“I don’t think we should loosen up our credit standards,” Clayton said. “In fact, the exact opposite. I’m looking for a better class of customers” who will buy higher-priced packages.
Dish purchased Blockbuster LLC in April -- a content advantage over its rivals, said Clayton -- and Sling Media Inc., maker of the Slingbox, in 2007. Dish will also unveil new customer promotions to win back customers in the third and fourth quarters, Clayton said.
Net income rose to $335 million from $257 million a year earlier. Sales rose 13 percent to $3.59 billion, compared with the $3.39 billion average analyst estimate.
Dish management won’t “tip our hands,” Clayton said, to give details about its plan to integrate Blockbuster, as well as DBSD North America Inc. and TerreStar Networks Inc., acquisitions that are still pending. In May, Chairman Charlie Ergen said Dish’s strategy was like an episode of “Seinfeld,” with all the parts coming together at the end.
Dish will consider more acquisitions, partnerships and divestitures as it decides on the best way to use the wireless spectrum it gains from DBSD and TerreStar, Clayton said.
“Results are consistent with our thesis that Dish is undergoing a repositioning,” said Mitchell, the analyst. “The company’s intention is to enhance its service profile by repurposing itself from a one-way satellite broadcast platform to a two-way hybrid satellite-wireless network.”
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