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EchoStar culls profit, cuts prospects

EchoStar Communications posted unexpectedly strong cash flow for the second quarter, but nevertheless sliced its subscriber growth outlook.

The company's cash flow totalled $134 million versus a $32 million loss during the same period last year. That's 50% more than analysts had expected. The company attributed the surprise to cost controls and strong accpetance of equipment leasing programs. The cost of acquiring subscribers totalled $515 each, off $50 from the first quarter though up sharply from $415 a year ago.

EchoStar is doing far better at finding new subscribers than rival DirecTV, adding 350,000 customers on Dish Network during the quarter versus 175,000 at DirecTV. Nevertheless, EchoStar reduced its subscriber growth forecasts to 1.75 million customers for the entire year, down from as many as two million targeted earler. Chairman Charlie Ergen cited the slowing U.S. economy and competition from cable-TV service.

The growth in subscrbers and profits comes in part from the company's equipment leasing plan, which lets the company capitalize some costs that used to hit cash flow. Echostar now has six million subscribers, up 41% from a year ago.

Ergen acknowledged that it has dropped its attempt to beat out News Corp. and but DirecTV parent Hughes Electronics. "We believed there were tremendous synergies between the companies," Ergen said. However, "They did not share our enthusiasm for that combination."
- John M. Higgins