DIRECTV's Volume Off As Forum Dials Up News

GM Spinoff Of Unit RumoredBy Jill Goldsmith, Daily Variety

29-Mar-00

DIRECTV President Eddy Hartenstein was tight-lipped Tuesday, March 28, 2000 about speculation that his company may merge with News Corp., but industry players at this yearís SkyForum confab seemed convinced DIRECTV parent General Motors will have to cut the unit loose eventually.News Corp. is in the process of grouping its worldwide satellite assets into a separate, publicly traded company and wants a foothold in the United States. ""I think as an outsider looking in, what News Corp. is trying to do makes sense,"" Hartenstein said. As to what News Corp.ís plans might mean for DIRECTV, ""I have nothing really to report or say on that,"" he added.Whereís The Synergy?GM has insisted that it wants to keep its 8.2 million-subscriber DBS company, insisting there are synergies between that business and autos. The only one that jumps to mind, however, is nascent satellite radio, and GM will have some formidable competitors in that arena.The giant automakerís reluctance to sell DIRECTV fueled rumors that News Corp. was pondering a takeover of all of GM, and insiders donít deny that such an idea has been batted around. DIRECTV trades as part of Hughes Electronics, a GM tracking stock, which has been buoyed of late by takeover talks.The shares have nearly tripled in the past year. But gains at much smaller competitor EchoStar, which has about 3.4 million subscribers, have been even more dramatic - that stock is up tenfold. A panel of financial analysts at SkyForum said Wall Street investors like a pure-play satellite company rather than one thatís part of a big conglomerate.Digital Cable LoomsWhile generally upbeat on the future of DBS, panel members and Hartenstein himself acknowledged that providers face a huge looming threat from digital cable, which will offer clearer picture and sound plus the larger number of channels that currently set satellite apart from analog cable. Itís key, analysts said, that the satellite industry convert as many consumers from cable as fast as possible before digital rolls out en masse.Shares of EchoStar and Hughes both dipped Tuesday.EchoStar lost 6.4 percent to close at $72; Hughes fell 2.4 percent to $126.88.

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