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Street Reacts to HNS/Thomson/DirecTV Deal
by wysiwyg2 02:16PM Thursday May 13 2004
As read on www.skyreport.com

DirecTV began the process of selling its Hughes Network Systems unit, inking a deal with Thomson Wednesday that allows the consumer electronics company to acquire HNS' set-top box manufacturing assets.

Wall Street had positive things to say about the deal, in which DirecTV willl receive from Thomson $250 million in cash, plus potential incentives for DirecTV of up to $150 million. Through the deal, Thomson will be the lead supplier of DirecTV set-top receivers, accounting for half of its needs, the companies said.

Merrill Lynch's Marc Nabi said the transaction is "a positive to the DirecTV story as management continues to sell its non-DirecTV assets to simplify the company and focus its efforts on direct broadcast satellite."

Nabi said he believes DirecTV will sell the remaining HNS divisions - such as corporate VSATs and the telecomm carrier equipment - since they are also not strategic to the satellite TV business. "Our estimate is that DirecTV can receive another $500 million of proceeds from the sales of these remaining divisions," he said.

Nabi said after the potential future sales, DirecTV would be left with three segments – DirecTV U.S., DirecTV Latin America, and Spaceway, the Ka-Band satellite system that could be used for data services.

William Kidd of Vintage Research said it's not surprising HNS is being moved in parts. "We still believe that DirecTV is trying to monetize other elements of HNS' holdings, possibly its investments in India as well as Spaceway, if it could," Kidd said in a research note.

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