NSE, DISH & SAT

News that the anomaly that caused the failure of the Lockheed Martin-built Intelsat 804 could be a systemic problem affecting similar in-orbit satellites operated by New Skies Satellites Holdings Ltd., Echostar Communications Corp. and Asia Satellite Telecommunications Holdings Ltd. (Asiasat) did not rattle investors – at least in the first 24 hours. Intelsat first reported the potential problem in its second quarter 2005 earnings report.

The stocks of all three companies closed up Aug. 11, the day Intelsat released its report. New Skies gained 7 cents and closed at $20.81 per share. Echostar gained 11 cents and closed at $31.01. Asiasat gained 9 cents and closed at $18.70.

Given the resurgence and recent success of satellite stocks in the public markets, one can infer that investors are taking a more long-term view of the industry and are not letting short-term speculation of possible problems drive the stock prices down. Of course, news of the possible systemic problem has been slow to disseminate, another reason why the stocks may not have reacted to the disclosure.

However, if any of the eight remaining Lockheed Martin-built 7000 series satellites do experience an anomaly, there could be a ripple effect across these three publicly traded companies.

WRSP

Worldspace Inc., after closing above its $21 initial public offering (IPO) price on the day it went pubic (Aug. 4), lost ground and has not closed above the IPO price since. The stock fell to a low of $18.09 Aug. 8, but did recover some of those losses, closing up in each of the next two trading days, before settling at $19.91 Aug. 11.

With no news expected in the near term due to the company being in a “quiet period” following the IPO, we are expecting more of the same fluctuations around the IPO price with no significant movement. Unlike other satellite companies that recently issued IPOs, Worldspace’s growth is not necessarily a slam dunk. It has taken a while for its satellite radio brethren, Sirius Satellite Radio and XM Satellite Radio, to gain recognition as legitimate competitors in the overall radio market. Worldspace is going to need a string of strong quarterly reports and solid subscriber growth before the stock shows any significant growth.

ISAT.L

Over on the London Stock Exchange, Inmarsat is in the midst of a streak of declines. The stock closed at a historic high of 3.57 pounds ($6.48) Aug. 3, and has closed down in each of the following trading days, ending Aug. 11 at 3.30 pounds ($5.98) which is a little surprising given the positive expectations surrounding the company’s broadband Global Area Network (BGAN) services. However, the service is not scheduled for formal launch until the end of the year, so it is possible that investors are seeking a comfort zone for how they value the stock until Inmarsat posts some real revenue numbers related to the BGAN offering.

Inmarsat will report its financial results as a public company for the first time Aug. 30. The results will cover the six-month period ended June 30.

Quarterly Earnings: PA

Panamsat Holdings Corp. reported an increase in total revenue for the second quarter 2005 to $213.8 million, up from $206.8 million in the second quarter 2004. However, the revenue increase was not enough to keep Panamsat profitable, as the company went from reporting a net income of $10.7 million in the second quarter 2004 to a net loss of $32.2 million in the second quarter 2005.

Panamsat was not specific about the factors contributing to the net loss for the most recent quarter, but pointed to a variety of events that impacted the bottom line, including its joint venture agreement with JSat to develop capacity for the U.S. market, the acquisition of the Europe Star-1 satellite and two orbital slots and the company’s activities in Latin America.

For the three months ended June 30, Panamsat reported its Fixed Satellite Service (FSS) revenues increased $9.7 million to $198.4 million from the same period a year ago. The increase was attributed to higher video services revenues due to increases in direct-to-home and program distribution revenues. The FSS revenue gains were partially offset by a reduction in network services revenues, attributed to the expiration of a lease associated with a non-core satellite that was used by a network services customers during the first eight months of 2004. Revenues from Panamsat’s G2 government services segment decreased slightly to $22.5 million for the second quarter 2005 from $22.6 million for the same period in 2004.

The numbers received a favorable reaction from the Wall Street, with Bear Stearns and Morgan Stanley noting that revenues exceeded expectations. Both firms also expect continued growth from the company going forward.

“We anticipate continued accelerating revenue growth throughout [the second half of the year], specifically in the G2 segment,” Benjamin Swinburne, analyst with Morgan Stanley said in an Aug. 10 research report. He noted that even though the G2 revenues were down in a year-over-year comparison, it still beat expectations.

“We continue to believe that management is guiding the company in the right direction and the company will be able to cultivate the appropriate mix of shareholder capital returns with growth initiatives,” Robert Peck, analyst with Bear Stearns said in an Aug. 10 research report.

The good news seemed to drive the stock price up with a small streak of gains early in the week. The stock closed at $19.68 Aug. 8 and increased to $19.83 the following day, when it’s the company reported its earnings. Panamsat’s stock gained an additional 7 cents before giving back some of its gains Aug. 11 and closing at $19.76 (pre-launch jitters, perhaps, as the Panamsat Galaxy 12 is scheduled for launch Aug. 12 after this issue of Satellite News went to press).

Quarterly Earnings: DISH

Echostar reported Aug. 9 an 18 percent increase in total revenues to $2.1 billion in the second quarter 2005, compared to $1.8 billion in revenues reported in the second quarter 2004. The increase was reported along side the addition of 225,000 net new subscribers during the second quarter ended June 30, bringing the total number of subscribers to Echostar’s Dish Network direct-to-home satellite television service to 11.5 million.

Echostar reported a net income for the just completed quarter of $856 million, up from a net income of $85 million reported in the same period one year ago. Net income for the second quarter 2005 includes a non-recurring, non-cash benefit of about $593 million to recognize the tax benefit of previously reported tax losses.

The numbers garnered a mixed reaction from Wall Street.

Tom Watts, analyst with SG Cowen & Co., said in an Aug. 9 research report that Echostar “reported a weaker than expected second quarter with both net adds and subscriber acquisition costs worse then estimates,” though he did note the company posted “inline or better financial results.”

“We didn’t see any trends in the quarter that we found particularly surprising,” Douglas Shapiro, analyst with Banc of America Securities said in an Aug. 9 research report.

The mixed reaction from Wall Street did not translate to a negative reaction by investors, as the stock jumped $1.61 Aug. 9 to close at $31.00, and after a slight drop the following day, ended up at $31.01 Aug. 11.

Shapiro attributed the movement to a variety of possible factors, including short covering, strong EBITDA (earnings before interest, taxes, depreciation and amortization), and feelings that Echostar may be up for sale sometime soon.