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$27.67 0.97 (3.63%)
7/8/2008 4:00 PM

Dish Networks (DISH)

CAPS Rating:
**

The Company, through its DISH Network, is a provider of satellite delivered digital television to customers across the United States.

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Avatar NetscribeMedia (< 20) Submitted: 1/31/07 7:00 AM : Underperform Start Price: $35.68 DISH Score: 11.62

Echostar is a holding company that operates two interrelated business, namely The Dish Network which provides a satellite subscription television services and Echostar Technology Corporation which designs and develops digital equipment. It is one of the market leaders in the industry along with DirecTV.

Unfortunately for Echostar, the sales growth in the first nine months of 2006 have not exactly resulted in increased net income due to high cost of sales and high interest expense. Also its competitor DirecTV has a larger number of subscribers and almost twice the free cash flow. While Echostar concentrates on higher subscriber acquisitions which results in huge customer acquisition costs, DirecTV concentrates on acquiring high quality subscribers i.e. subscribers who are less likely to leave the company.

Meanwhile, the satellite broadcasting market has undergone some drastic changes with companies like Comcast offering voice, video and data traffic together through the same connections. Echostar has combined with AT and T to provide such a package to its customers. Echostar has also signed an agreement with new US start up airline Virgin America according to which the company will provide live in flight satellite entertainment. The Digital Video Recording (DVR) market is growing rapidly which will augur well for the company. To take full advantage of this trend, Echostar has announced that it will offer free DVR’s to customers as part of its Digital Home Advantage Program.

But the patent infringement case with Tivo has resulted in an increase in litigation costs which has affected the company’s margins. It also appears that Echostar will end up loosing the case and paying millions in damages. Not just that, it could be prohibited from distributing DVR’s which could spell doom for its business. With a loss in the court case looming large and increased competition from cable companies, it looks like 2007 will be a rough year for Echostar.

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Avatar NetscribeMedia (< 20) Submitted: 5/31/07 6:49 AM

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EchoStar Communications is a leading satellite television service provider that has more than 13 million subscribers, 14 owned or leased in-orbit satellites enabling it to offer over 2,500 video and audio channels to consumers across the United States. EchoStar Communications finished the first quarter on a strong note with revenues increasing 15% to $2.64 billion with 310,000 new subscriber additions. The company continues to add customers and increase average revenue per user, but on the back of lower margins. High Definition and Digital Video Recorder seem to have huge potential for future growth and is focusing more on customer retention. Also the rural markets and those who need foreign channel are underserved and can be tapped.

However lacks the broadband services to effectively compete with the industry biggies and still remains week in the voice on demand offering. A partnership with Google has been reach to broker television-advertising spots on EchoStar's Dish Network through its automated auction system. The deal with Disney would entitle it to air Disney title on demand. Financial health looks poor carrying a huge amount of debt in its balance sheet. Cash flow and cash balance has depleted over the quarter with credit rating agencies giving speculative ratings making conditions worse.

The company is operating in a highly regulated environment with competition from all sides as witnessed by the Federal Communications Commission passing new legislations that makes life easier for telecom majors to enter cable video business. The future depends on its ability to capture new subscribers at an acceptable cost with lower churn rates and avoiding incurring higher costs for retention marketing. Summarizing the above it is looks sensible to avoid the stock for near future.

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