DirecTV Posts $407 Million Profit, Down From Last Year

DirecTV Group Inc., the nation's largest satellite TV operator, on Thursday reported an 11 percent drop in second-quarter profit as higher customer-acquisition costs offset revenue growth.

The El Segundo, Calif.-based company said that customers were cutting back on premium channels and pay-per-view programming. But DirecTV added 224,000 net new subscribers in the quarter, 74 percent more than the same period last year, at a time when cable operators are losing basic video customers.

It was DirecTV's first full quarter of partnership with AT&T Inc. to cross-sell each other's services, which boosted customer rolls.

DirecTV earned $407 million in the quarter, down from $455 million in the same quarter a year ago. Earnings per share held steady at 40 cents, below the 43 cents forecast by analysts polled by Thomson Reuters.

Revenue rose 9 percent to $5.22 billion from $4.81 billion, beating analysts' average estimate of $5.18 billion.

DirecTV's subscriber acquisition costs came to $727 million, up 15 percent from last year, due to a higher number of customers. The average cost per subscriber added fell 2 percent to $694.

The average monthly revenue received from subscribers rose 1.7 percent to $83.16. Free cash flow grew by 47 percent to $550 million.

"We continue to gain market share," said Larry Hunter, interim CEO, in a conference call with analysts. "The majority of our new gross adds continue to come from cable."

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"DirecTV continues to execute at a very high level, quarter after quarter after quarter. Their product and management remain strong, and their key competitor (Dish Network) remains in relative disarray," Craig Moffett, senior analyst at Sanford Bernstein, wrote in a note to clients.

But DirecTV said the third quarter will be tougher. The company expects to add 156,000 net subscribers, about the same as in the year-ago period.

DirecTV cut its monthly subscriber revenue forecast by 1 percentage point to a range of 1 percent to 2 percent for the year. It also said 2009 cash flow will be lower by $150 million to $200 million as it serves 400,000 to 500,000 new customers.

Revenue at DirecTV Latin America rose 11 percent to $680 million. The division added 128,000 net new customers, which offset a decline in average monthly revenue per subscriber in Brazil.

In June, Chase Carey resigned as DirecTV's president and CEO to return to News Corp. as Rupert Murdoch's second in command. Carey, 55, joined News Corp. July 1 as deputy chairman, president and chief operating officer.

DirecTV also said that its spin-off from Liberty Media Corp. is on track to be completed within the next couple of months.

Later this year, DirecTV plans to offer live streaming of NFL games on cell phones. It also plans to launch downloadable TV applications.

Shares of DirecTV slid 92 cents, or 3.6 percent, to $24.84.

Comments

[Otaku1031]

Poor baby. The drop in profits probably comes from various AG's offices telling them to stop their deceptive sales practices that were resulting in large early termination fines and "lost equipment" fees. They once told me I had to give them MY DVR. They said my "contract" allowed them to take possession because I had connected it to their service. I had never seen nor agreed to the terms of this "contract" prior to hooking up the DVR. A copy of the document arrived in the mail 2 weeks later. When I told them to shove it, they sent me a bill for $250, with a threat to call in a collection agency if I refused to pay. I contacted the CA AG's office and a month later I got an apology from DirecTV absolving me of all charges. Another scam - the model R15 DVR (a total POS) that they lease WILL fail within two years. They'll send you a new one, no charge, but as soon as you hook it up you're committed to another 2 year "contract". They won't tell you this on the phone, BTW. It's self-perpetuating - you can't get out unless you pay the early termination fee or the monthly charges while unable to get a signal through the broken DVR.
I've been lied to many times by these guys. If you have similar issues with these thugs, call in the big dogs on 'em. They're slowly but surely having to shut down these

[Otaku1031]

To clarify the DVR failure mentioned above, it appears to occur immediately after an automated software "upgrade" that is downloaded to the DVR periodically. I found it interesting that the failures always occurred within the last three months of the 2 year "contract" and always after the software "upgrade". Coincidence? I think not.

[Martampa]

I was a loyal Directv customer for 10 years but due to the monthly charges had to discontinue the service. They charged me $226. for early termination of a contract on a receiver that I did not know had a contract. This was never explained to me when one of the receiver's that I owned broke and Directv replaced it. So am I supposed to be sad that Directv only made $407 million last year. Boo Hoo!

[shirleyfeeney]

The ONLY reason I stay with DirecTV is so that this transplanted Giants fan can watch the games every Sunday. Dish Network gets msnbc in HD, but I don't. That's just wrong.

Besides, anyone who's crying over $407 million has some serious problems.

[raven119]

Murdoch won't get my business.

[manhattanbeachboy]

He doesn't really control DTV anymore. Bought MySpace.

[Schoolgirl666]

Their profits will return as soon as the customers who switched to cable return to satellite.

[rmct]

who would switch to cable. Direct tv rocks. NFL Package is the best. Go Raiders

[aquarius2]

Maybe Direct TV rocks your world but I am getting damn tired of losing the signal during thunderstorms. During the winter when snow built up on the dish the signal disappeared. As much as I hate cable I am going to have to go back.