Hughes Network Systems Inc., the Germantown company that sells Direcway satellite Internet service, narrowed its losses in the first quarter as sales rose, the firm said.
The company, whose 500,000 customers make it the world's largest satellite Internet service provider, also makes receivers for parent company Hughes Electronics Corp.'s DirecTV satellite television service.
"One of the biggest challenges has been the economy. We went through this period of 18 months where people just didn't want to buy anything," said Michael L. Cook, HNS senior vice president. "Things froze up in the pipeline, but that thawed at the beginning of this year."
HNS lost $39.8 million in the first three months of the year, an improvement from a loss of $48.5 million in the same period of 2002. The company cited a $6 million charge that it took for laying off 20 percent of its staff last year and cited improved efficiencies associated with its larger subscription base this year. Its first-quarter revenue rose to $247.4 million from $242.8 million.
Hughes Electronics Corp., which also includes DirecTV Latin America and PanAmSat Corp., announced narrower losses of $50.9 million on increased revenue of $2.2 billion. That compares with a loss of $837.7 million on revenue of $2 billion during the same period a year ago.
News Corp. announced last week it would purchase a 34 percent controlling stake in Hughes Electronics. The acquisition opens up potential new sales channels for HNS products, but some analysts also speculate about whether the new owners will eventually abandon Spaceway, HNS's $1.8 billion very-high-speed Internet service to be launched next year.
Analysts say a marriage between Hughes's DirecTV and News Corp.'s Fox, BSkyB and other broadcast holdings could mean greater sales for HNS. The company could market its hardware, as well as its Internet service, to News Corp.'s customers.
HNS is one of the Washington area's largest technology employers, with about 2,500 employees here. It managed to weather a failed merger proposal between Hughes Electronics and EchoStar Communications Corp., and a slow economy that contributed to the Chapter 11 bankruptcy filing of its primary U.S. competitor, StarBand Communications Inc. in McLean.
"There are a lot of strategic decisions the News Corp. people are going to have to make; on the other hand, HNS will get new tools to work with -- a bigger worldwide subscriber base to sell boxes and broadband to," said Jimmy Schaeffler, an analyst with the Carmel Group, a California-based telecommunications consultant.
HSN's new owners, however, may question the wisdom of the company's Spaceway project, which the company says will offer cheaper, faster, more advanced services by the middle of next year. HNS said it anticipates Spaceway to add $1.1 billion in sales, nearly doubling its revenue. The project is already 80 percent completed, but already some analysts are questioning whether there is enough of an audience for the service to justify its cost.
HNS, which was founded in 1972 as Digital Communications Corp., was purchased by M/A-Com Inc. in 1978, then by Hughes Electronics in 1987.