Breakfast News


Friday, September 17, 1999

"To avoid criticism do nothing, say nothing, be nothing."
-- Elbert Hubbard

Hughes Unit To Jettison 5% of Workforce

By Richard McCaffery (TMF Gibson)

Satellite manufacturer, operator, and services company Hughes Electronics (NYSE: GMH), a subsidiary of automaker General Motors (NYSE: GM) and the world's largest satellite maker, plans to cut 450 workers because of a lag in orders for new spacecraft, The Wall Street Journal and Bloomberg reported.

Hughes and the satellite industry as a whole have gotten the Mr. Bill treatment recently as Iridium (Nasdaq: IRIQE) and ICO Global (Nasdaq: ICOFQ), two start-up satellite telephone companies, filed for protection from creditors under Chapter 11. A handful of projects have been delayed, financing has dried up, and investors are skittish.

Second quarter revenue at Hughes' satellite system division declined to $554 million from $675 million from the same period last year because of increased costs and schedule delays. The unit reported negative earnings before interest, taxes, depreciation, and amortization (EBITDA) of $120 million for the quarter, compared to positive EBITDA of $72 million last year.

In addition, since it's not uncommon for satellite manufacturers to have an equity position in companies they're building spacecraft for, more bad news could be on the way. Hughes is building ICO's 12 communications satellites and has a 2.6% stake in the firm. If ICO can't pay what it owes, Hughes could have to take about a $500 million pretax charge against earnings. Ouch.

On the bright side, Hughes owns DirecTV, the country's largest provider of satellite television services -- you see the little 18-inch dishes on rooftops and porches everywhere. DirecTV has the exclusive rights to broadcast NFL Football games every Sunday. This is a cash cow for the company, a fast-growing business with substantial barriers to entry, and a blessing for sports fans everywhere lucky enough to have a roof to mount a dish on.

News to Go

Athletic shoe maker Nike (Nasdaq: NKE) said net income grew 22% to $200 million, or $0.70 per share for its fiscal first quarter, topping estimates by $0.04. The company said cost cutting boosted its bottom line.

Online publishing software company Adobe (Nasdaq: ADBE) blew away Q3 analyst estimates of $0.74 per share, earning $0.80 per diluted share (excluding restructuring and other charges as well as investment gains and losses) on profits of $57.2 million. The company said the shipment of Adobe Photoshop 5.5 and the continued strength of Adobe Acrobat spurred the growth.

Cable television holding company Cablevision (AMEX: CVC) plans to buy about $1 billion worth of set-top boxes from electronic equipment giant Sony (NYSE: SNE) in a deal that signals the Japanese manufacturer's first step into the U.S. cable set-top box industry, The Wall Street Journal reported.

Automaker DaimlerChrysler (NYSE: DCX) recalled 717,000 vehicles because of problems with the vehicles' engine cradle control arms.

Defense and electronics stalwart Raytheon (NYSE: RTN.B) could have to swallow $450 million to deal with problems in the company's electronics and engineering business, The Wall Street Journal reported.

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