Sell it or take it private.
If Charles Ergen, EchoStar's (NasdaqNM
ISH - News) chief executive, chairman and controlling shareholder, takes either step, investors likely would cheer.
EchoStar's stock swooned 18% in 2005, despite a late-year rally that began in mid-November. Shares rose amid rumors that phone giant AT&T (NYSE:T - News) might try to buy EchoStar, the nation's No. 2 satellite TV broadcaster behind DirecTV (NYSETV - News).
That rally has stalled. While speaking at last week's Consumer Electronics Show in Las Vegas, Ergen denied any plans to sell the company he founded. And AT&T might have other priorities, such as trying to buy BellSouth (NYSE:BLS - News), some analysts say.
And EchoStar shareholders continue to speculate on chances the company will be taken private. That scenario gained support after two midsize cable TV firms, Cox and Insight, went private over the past two years.
Since Ergen controls roughly 90% of EchoStar's voting stock, the path to privatization would be easier than it's been for other companies. Adding to shareholder hopes to make more money from their stock has been the company's policy of buying back shares, as well as Ergen's own comments about the travails of being a public company.
"Speculation has cooled about an AT&T acquisition, but privatization has always seemed more likely," said Craig Moffett, an analyst at Bernstein Research.
More likely, but anything but certain, says Moffett.
EchoStar's board authorized a stock buyback of up to $1 billion in August 2004. Set to expire last August, the board extended the buyback's duration through 2006. As of Oct. 31, 2005, about $200 million in shares had been acquired.
Littleton, Colo.-based EchoStar has a market valuation of about $13 billion. Ergen owns about $7 billion in Class B stock, which has more voting rights than the Class A stock, giving him a firm hold on the company.
Ergen has been a maverick in the pay-TV industry for two decades. He chose to take on DirecTV, a satellite service originally launched by General Motors' (NYSE:GM - News) subsidiary Hughes Networks.
EchoStar passed the 12 million subscriber mark in December. DirecTV, now controlled by News Corp. (NYSE:NWS - News), has more than 15 million customers.
And EchoStar's profit is up. Its third-quarter net income rose to 46 cents per share from 22 cents in the year-earlier quarter.
Shares in DirecTV and cable TV firms also have lagged amid fierce competition. Analysts say both DirecTV and EchoStar face higher marketing costs than before, and they already had higher costs than cable TV firms.
SBC Communications, now AT&T, invested $500 million in EchoStar in 2003. AT&T offers EchoStar's Dish service in a product bundle along with its own Internet access and phone service.
AT&T has been upgrading its residential network to fiber-optic wiring so that it can sell TV services, similar to cable firms. EchoStar could give them a better option. Some analysts say AT&T could drop its fiber and instead buy EchoStar.
Ergen, 53 years old, might not be ready to sell out. He's been ambitious. Although the smaller company, EchoStar agreed in 2001 to buy DirecTV from GM. Regulators blocked the deal in 2002 on antitrust grounds, leading to DirecTV's sale to News Corp.
Some pundits speculate that Murdoch might try to buy EchoStar, but only if Ergen is willing to sell.
Any such deal might depend on timing, says Blair Levin, an analyst at Stifel, Nicolaus & Co.
"A DirecTV-EchoStar deal in the near term would meet the same fate as the earlier deal -- rejection," he said.
But Levin says regulators could warm up to a merger if the pay-TV market changes. That might depend on whether phone companies follow through on plans to sell pay-TV, or if Internet video booms.
http://biz.yahoo.com/ibd/060112/tech.html?.v=2
If Charles Ergen, EchoStar's (NasdaqNM
ISH - News) chief executive, chairman and controlling shareholder, takes either step, investors likely would cheer.EchoStar's stock swooned 18% in 2005, despite a late-year rally that began in mid-November. Shares rose amid rumors that phone giant AT&T (NYSE:T - News) might try to buy EchoStar, the nation's No. 2 satellite TV broadcaster behind DirecTV (NYSE
TV - News).That rally has stalled. While speaking at last week's Consumer Electronics Show in Las Vegas, Ergen denied any plans to sell the company he founded. And AT&T might have other priorities, such as trying to buy BellSouth (NYSE:BLS - News), some analysts say.
And EchoStar shareholders continue to speculate on chances the company will be taken private. That scenario gained support after two midsize cable TV firms, Cox and Insight, went private over the past two years.
Since Ergen controls roughly 90% of EchoStar's voting stock, the path to privatization would be easier than it's been for other companies. Adding to shareholder hopes to make more money from their stock has been the company's policy of buying back shares, as well as Ergen's own comments about the travails of being a public company.
"Speculation has cooled about an AT&T acquisition, but privatization has always seemed more likely," said Craig Moffett, an analyst at Bernstein Research.
More likely, but anything but certain, says Moffett.
EchoStar's board authorized a stock buyback of up to $1 billion in August 2004. Set to expire last August, the board extended the buyback's duration through 2006. As of Oct. 31, 2005, about $200 million in shares had been acquired.
Littleton, Colo.-based EchoStar has a market valuation of about $13 billion. Ergen owns about $7 billion in Class B stock, which has more voting rights than the Class A stock, giving him a firm hold on the company.
Ergen has been a maverick in the pay-TV industry for two decades. He chose to take on DirecTV, a satellite service originally launched by General Motors' (NYSE:GM - News) subsidiary Hughes Networks.
EchoStar passed the 12 million subscriber mark in December. DirecTV, now controlled by News Corp. (NYSE:NWS - News), has more than 15 million customers.
And EchoStar's profit is up. Its third-quarter net income rose to 46 cents per share from 22 cents in the year-earlier quarter.
Shares in DirecTV and cable TV firms also have lagged amid fierce competition. Analysts say both DirecTV and EchoStar face higher marketing costs than before, and they already had higher costs than cable TV firms.
SBC Communications, now AT&T, invested $500 million in EchoStar in 2003. AT&T offers EchoStar's Dish service in a product bundle along with its own Internet access and phone service.
AT&T has been upgrading its residential network to fiber-optic wiring so that it can sell TV services, similar to cable firms. EchoStar could give them a better option. Some analysts say AT&T could drop its fiber and instead buy EchoStar.
Ergen, 53 years old, might not be ready to sell out. He's been ambitious. Although the smaller company, EchoStar agreed in 2001 to buy DirecTV from GM. Regulators blocked the deal in 2002 on antitrust grounds, leading to DirecTV's sale to News Corp.
Some pundits speculate that Murdoch might try to buy EchoStar, but only if Ergen is willing to sell.
Any such deal might depend on timing, says Blair Levin, an analyst at Stifel, Nicolaus & Co.
"A DirecTV-EchoStar deal in the near term would meet the same fate as the earlier deal -- rejection," he said.
But Levin says regulators could warm up to a merger if the pay-TV market changes. That might depend on whether phone companies follow through on plans to sell pay-TV, or if Internet video booms.
http://biz.yahoo.com/ibd/060112/tech.html?.v=2
