[Satellite News 11-08-11] EchoStar Corp. generated a 42 percent, year-over-year increase in its 2011 fiscal third quarter revenues at $863 million, but the company’s profit margin dipped into a net loss of $19 million after reporting a $5.2 million profit during the corresponding period in 2010, according to its latest financial results issued Nov. 7.

   EchoStar’s sister company Dish Network also increased its 2011 third quarter revenues to $3.6 billion — a 12.3 percent increased compared with $3.21 billion in the same period last year. Unlike EchoStar, Dish Network’s profits fared extremely well during the period, jumping 30.3 percent from the 2010 third quarter to $319 million.

   Dish Network President and CEO Joe Clayton said the U.S.-based pay-TV operator narrowed its net subscriber loss from the previous quarter, but continued to be, “affected by increased competitive pressures, including aggressive competitive promotional offers, discounting and a weak housing market. Going forward, we plan to build on the momentum of our introduction of the Blockbuster-branded programming service which allows Dish customers to stream movies and TV shows as well as receive DVDs by mail,” Clayton said in a statement, referring to EchoStar’s acquisition of Blockbuster earlier this year.

   EchoStar said that Dish Network purchased fewer digital set-top boxes and related components from the company as a result of Dish Network’s higher-than-normal inventory levels during the third quarter. EchoStar also warned that that Dish Network’s revenue could be lower in the future than it has been in the past. “This decrease could have a material adverse effect on our results of operations. In addition, to the extent that Dish Network’s gross subscriber additions continue to decrease or Dish Network continues to experience a net loss of subscribers, sales of our digital set-top boxes and related components to Dish Network may further decline, which in turn could have a further material adverse effect on our financial position and results of operations,” EchoStar management said in a Nov. 7 filing with the U.S. Securities and Exchange Commission (SEC).

   EchoStar depends on Dish Network hardware orders for a majority of its revenues. While EchoStar said that any decreases in Dish Network subscriber growth would impact its future performance, “[those losses] may be offset in the near-term by an increase in sales to Dish Network resulting from the upgrade of Dish Network subscribers to advanced products such as high-definition (HD) receivers and HD DVRs, as well as by the upgrade of Dish Network digital set-top boxes to new technologies, such as MPEG-4 digital compression technology.”

   While EchoStar said it expects to continue to providing satellite services to Dish Network for the foreseeable future, its satellite capacity requirements may, “change for a variety of reasons, including the launch of its own additional satellites,” according to the filing.

   EchoStar CEO Michael Dugan said he believes the international markets provide the best opportunities for developing potential new customers for its EchoStar Technologies business in the near-term. “We expect our performance in international markets to be a significant factor in determining whether we will be able to generate revenue and income growth in future periods,” Dugan said in a statement. “In particular, we have noticed an increase in new market entrants, primarily located in Asia, that offer low cost set-top boxes, including set-top boxes that are modeled after our products or products of our principal competitors. The entry of these new competitors may result in pricing pressure in international markets that we hope to enter. If market prices in international markets are substantially reduced by such new entrants, it may be difficult for us to make profitable sales in international markets.”

   Dugan added that in order for the company to expand revenues in its EchoStar Satellite Services business, it must displace incumbent suppliers that often benefit from long-term contracts. The company could achieve this through a service acquisition. “As a result, to grow our EchoStar Satellite Services business we may need to develop or otherwise acquire access to new satellite-delivered services so that we may offer differentiated services to prospective customers,” Dugan said. “In addition, as our satellite fleet ages, we will be required to evaluate replacement alternatives such as acquiring, leasing or constructing additional satellites, with or without customer commitments for capacity.”