NEW YORK EchoStar CEO Charlie Ergen was uncharacteristically absent from the company's second-quarter earnings call Thursday as the country's second-largest satellite TV provider reported an 80 percent decline in net income.
The executive was sidelined by "a longstanding family vacation," said EchoStar chairman Carl Vogel, who added that investors shouldn't "read too much into" Ergen's absence. "Charlie said at the beginning of this year he isn't going to spend as much time on these quarterly conference calls," Vogel said. "I wouldn't take that as any indication of any lack of interest in the business. He is, in my judgment, fully engaged."
The earnings call came just two days after News Corp. chairman and CEO Rupert Murdoch threw cold water on speculation that DirecTV was looking to buy out EchoStar's Dish Network, telling investors Tuesday that there have been "no negotiations at all" between the two DBS giants. "There have been a few friendly conversations but nothing to report," Murdoch said during News Corp.'s fourth-quarter earnings call.
Murdoch's update seemed to deflate EchoStar's share price Wednesday, as the stock closed at $31.48, down 10 percent. EchoStar sustained another blow when Sanford Bernstein analyst Craig Moffett on Wednesday downgraded both its stock and DirecTV's from "market perform" to "underperform." In a note to investors, Moffett wrote that the ongoing merger speculation had driven EchoStar's share price to unsustainable heights, which in turn left "valuations stretched even as huge questions remain as to whether a merger is even possible from a regulatory perspective."
By Friday morning, EchoStar's stock showed signs of rebounding, opening at $32.77 and gaining ground at $33.14 per share in early trading. The company hit its 52-week high on Aug. 4 with a share price of $35.95.
Although the 80 percent drop in profits appeared ominous at first blush—the company took in $168.8 million during the quarter, versus $855.5 million in the year-ago period—the earlier figures had been bolstered by a significant onetime tax gain. Revenue was up 17 percent to $2.5 billion, and Dish ended the quarter with 12.5 million subscribers, for a net gain of 195,000, down 13 percent from the 225,000 subs gained in the second quarter of 2005.
Average revenue per user climbed to $62.71 from $58.53 a year ago, thanks in large part to higher subscription fees.
Meanwhile, a long-standing regulatory matter could affect service to hundreds of thousands of Dish Net subs as early as September. In 1998, the broadcast networks sued EchoStar, alleging that its delivery of distant network programming was in violation of federal law; in May, a federal district court ruled that Dish must pull the plug on such transmissions in order to comply with the demands of the broadcasters and a number of their affiliates.
EchoStar has settled with ABC, NBC, CBS and other station groups in the course of the dispute, but has not reached an accord with Fox, among others.
EchoStar senior vp and general counsel David Moskowitz said the company serves less than 1 million distant subs. "We are anxious to try to reach a settlement with the remaining broadcasters," Moskowitz said, adding that the company has "a number of pieces that we have in place to try to make any necessary transition as easy as possible and minimize the disruption."