A Shining EchoStar

By Mara Der Hovanesian

Last October, Inside Wall Street reported that EchoStar Communications (DISH ) might surface as a suitor for Hughes Electronics' DirecTV (GMH ), the nation's largest satellite-television broadcaster, now owned by General Motors. Indeed, EchoStar, the No. 2 player in satellite-to-home services, came through on Aug. 5 with a stock-swap offer valued at about $30 billion. "The synergies that would come from this combination are the best you can get," says analyst Vijay Jayant of Morgan Stanley, who pegs EchoStar at 50. It currently trades at 28.

With or without Hughes, EchoStar enthusiasts say it's a gem. Sure, the two companies combined would have 16 million subscribers and go head-to-head with the nation's top cable operators--if, that is, EchoStar's bid beats out a competing offer by Rupert Murdoch's News Corp. (NWS ) and then gets the nod from regulators. But EchoStar is already adding subscribers faster than its rivals. In the second quarter, it surprised analysts by reporting first-ever operating profits of $64 million, plus a net profit of $2 million. Deryck Lampe, portfolio manager of Stein Roe & Farnam, says the Littleton (Colo.) outfit will generate $380 million in cash flow this year and will top $2.5 billion by 2004. "What is truly impressive is the very limited investment required to generate this level of growth," says Lampe, who first bought the stock in February and now has 3 million shares, purchased at an average cost of 27. He expects the stock to be "north of 50" by this time next year.

Gene Marcial is on vacation.

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