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Semiconductor industry

DirecTV and Echostar Face Competitive Landscape Amidst 2006 Plans

Strategic Insights

— 1 min read

As 2006 commences, DirecTV is poised for a strong year with deals in place with Intel, Microsoft, and FX/Fox, while Echostar navigates a challenging industry landscape. DirecTV's collaborations aim to integrate its content with PC screens, laptops, and set-top boxes via Intel's Viiv technology, as well as promote two-way links to direct broadcast satellite set-top boxes and Windows-based PCs. Echostar, on the other hand, is facing declining gross subscriber additions, leading analysts to speculate about potential price increases.

Key Takeaways:

  • DirecTV has announced deals with Intel, Microsoft, and FX/Fox to integrate its content with PCs, laptops, and set-top boxes, promoting tight integration between Windows Media PCs and DirecTV boxes.
  • Echostar's gross subscriber additions declined in 2005, according to Bear, Stearns & Company, which suspects that the company may need to implement price increases, possibly up to 10% for certain packages.
  • Bear, Stearns ranked Echostar as "peer perform" despite the decline in gross subscriber additions, citing potential for multiple expansion in the face of key issues like greater visibility into subs growth and economics.
  • Echostar announced a new line of HD receivers, a DISH-1000 antenna, and a $54.99/month DishHD package with 25 national HD and 70 standard channels.
  • Morgan Stanley is bullish on SES Global's $1.16 billion purchase of New Skies, ranking SES among its "top five picks of the year" and raising its price target from 16.50 euros to 18 euros ($19.94 to $21.76).

Statistics:

  • As of press time, DirecTV shares were trading at $14.48, with a 52-week high of $16.79 and a 52-week low of $13.17.
  • Bear, Stearns downgraded DirecTV to "peer perform" on Jan. 6, reiterating its concern that the company is in a "transition" phase with long-term growth and free cash flow generation potential.
  • Echostar's shares were trading at $27.76, with a 52-week high of $34.38 and a 52-week low of $26.28 as of press time.
  • Morgan Stanley predicts SES Global will execute a 500 million euro share buyback (at 16 euros per share) to stay within its planned 3x net debt/EBITDA target.

Sources:

  • [DirecTV Bullish As 2006 Begins] (Access Intelligence, LLC, 2006)
  • [Did Echostar Gross Sub Additions Decline in 2005?] (Bear, Stearns & Company, Jan. 9, 2006)
  • [SES Global's New Skies Acquisition Applauded by Morgan Stanley] (Morgan Stanley, Jan. 2006)

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