Dish Tumbles After Profit Trails Analysts’ Estimates
Dish Network Corp. (DISH), the second- largest U.S. satellite-television provider, fell after reporting second-quarter profit that missed analysts’ estimates.
Quarterly profit was 50 cents a share, the Englewood, Colorado-based company said today in a statement. The average of estimates compiled by Bloomberg was 66 cents.
Dish preannounced a net subscriber loss for the quarter of 10,000 on July 19. While that was smaller than some analysts’ estimates, Dish needs to persuade its customers to spend more on its products, Craig Moffett, an analyst at Sanford C. Bernstein & Co. in New York, said in an interview. Dish’s average monthly revenue per user was little changed at $78.11, less than the $78.91 average of nine estimates compiled by Bloomberg.
“It appears that the subscriber improvement came at a cost,” Vijay Jayant, an analyst at ISI Group in New York, said in a note to clients.
The shares slid 0.2 percent to $30.60 at the close in New York, after dropping as much as 6.6 percent, the most intraday since Nov. 15. Dish has gained 7.4 percent this year.
Subscriber-related expenses rose 5.6 percent to $1.83 billion, primarily because of higher programming costs. Dish will see a “small” decrease in programming expense this quarter after ending its contract with AMC Networks Inc. (AMCX), Chairman Charlie Ergen said on a conference call. Dish stopped carrying all AMC networks July 1, the third quarter’s first day.
“We could pay for every customer who would watch ‘Mad Men’ -- we could pay for entire iTunes bills and that would be cheaper than burdening our customers if you don’t watch those channels with that cost,” Ergen said. “Long term, we’re going to be several dollars less than our competitors because we don’t carry those channels.”
Subscriber acquisition costs jumped 18 percent to $404 million. Dish spent $806 to acquire a new subscriber, up from $795 a year earlier. The rise reflected increased marketing expense related to Dish’s advertising campaign around the Hopper, a multi-room digital video recorder.
Net income fell 33 percent to $225.7 million from $334.8 million, or 75 cents a share, a year earlier. Sales declined less than 1 percent to $3.57 billion, missing the $3.63 billion average analyst estimate.
“Investors in DirecTV (DTV) have fretted that rising programming costs have doomed the U.S. business,” Moffett wrote in a note to clients. “Investors in Dish Network have, until now, posited a turnaround. It’s getting harder and harder to plausibly argue that this is a turnaround.”
Dish is also waiting for the Federal Communications Commission to approve use of its wireless spectrum for transmitting mobile video. The company is expanding into wireless after losing customers in six of the last nine quarters as competition from DirecTV and cable providers pressures revenue and climbing programming costs boost expenses.
The company “expects a favorable resolution in the next few months,” Chief Executive Officer Joseph Clayton said on the call.
Dish disclosed it has invested $396 million in the “debt securities of a single issuer.” Dish declined to identify the company.
“There has been much speculation that this investment was in Clearwire debt,” Jennifer Fritzsche, an analyst at Wells Fargo & Co., wrote in a note to clients. Mike DiGioia, a Clearwire Corp. (CLWR) spokesman, declined to comment.
Dish’s “most logical” entrance into the wireless business will be to form a partnership with a company “where there is synergy,” Ergen said.
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