Satellite TV

  • Sooner or later, every company in a hyper-growth industry becomes part of the rest of the economy, with cycles like any other. Satellite television has been around for a while, and has had ups and downs, but Dish Network Co.’s first-ever decline in subscribership in its most recent quarter illustrates that the industry cannot simply count on automatic growth in new customers. The stock fell 3.6% Monday after the company said it lost 25,000 subscribers in the quarter, short of expectations. “Dish Network, like Sprint, looks more than ever like a company poised on the brink of secular decline,” said Craig Moffett, an analyst at Sanford C. Bernstein. “While our expectations had gone from a merely weak subscriber quarter to a negative one in the wake of very weak Dish results from AT&T, seeing a negative subscriber result from Dish Network today is nevertheless a shock.” The company had put together a deal with AT&T to deliver more subscribers, but AT&T only registered 3,000 net new subscribers for the quarter, and has terminated the arrangement. Then again, it may be a case of newer technologies outrunning Dish — analysts say the company is weak in its high-def offerings, and more consumers are looking to fiber-optic TV services. “DISH remains inexpensive relative to its peers, but with the market disproportionately awarding winners over losers, we think it may be hard to make a case for DISH based on relative valuation,” write analysts at Kaufman Brothers Equity Research.
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    Wachovia shares slumped, losing 9.9%.
  • The herd mentality was alive and quite evident in the trading of Wachovia Corp. shares Monday. All it took was one note from Morgan Keegan analyst Robert Patten, who did not change his underperform rating on the shares, but merely noted that the recent rally was more than likely attributable to short-covering, and therefore, not entirely warranted. In his note, Mr. Patten puts forth a few simple thoughts, such as, “We would be defensive and take profits ahead of the meeting as the reality is…there are no easy fixes near term at Wachovia.” (The meeting he refers to was a scheduled summit between sell-side analysts an d new chief exec Bob Steel.) “Nothing has changed fundamentally,” he adds. “We have seen this same story play out several times before during this current credit cycle,” he writes. Those aren’t tough concepts to grasp, and probably made the act of responding by putting in a sell order to one’s broker all the easier. The shares slumped late in the day, ending at $17.11, down 9.8%.

    • Fed

  • Regarding the moves the Federal Reserve has made to try to boost economic growth and provide liquidity to the financial system, it has so far been better at the latter than the former. However, these are inextricably linked, or at least, in the market’s eyes. “We view it unlikely that the Fed will raise rates while financial markets are still judged to be under stress,” writes Ethan Harris, chief economist at Lehman Brothers. “In the near term, the majority of the committee is likely to view these facilities as complementary with low interest rates, rather than as substitutes.” Heading into the results of Tuesday’s talking-Fed-head confab, various money rates are still higher than the norm, but the targeted moves through various lending facilities is steadily having an effect. Meanwhile, long-term market rates, such as for residential mortgages or long-term business loans, still suggest a greater level of expense than what borrowers were paying before the Fed started cutting interest rates. Tomorrow should not hold any surprises — the market is expecting the federal-funds rate will remain unchanged at 2%. But the expectation remains in favor of tighter rates down the road; the action in the federal-funds futures contract on the Chicago Board of Trade puts the odds at 64%.

    • Oil

  • What the slide in crude oil accomplished, ultimately, was that it limited the declines in stocks. The broader market ended lower, led by weakness in technology, banks and the oil and oil-service sectors, as investors pulled back across the board ahead of the Federal Reserve’s announcement tomorrow (which is not anticipated to include any change in monetary policy). Skepticism of the market’s ability to sustain a rally remains as investors regard economic data with caution, concerned that the upturn in economic activity in the second quarter will prove short-lived once the third quarter is waning. “A dollar or two either way on crude oil is not going to change my outlook for a retailer,” says Brian Rauscher, head of portfolio strategy at Brown Brothers Harriman. With the Federal Reserve considered, for the most part, to be in a box, it leaves the market waiting until positive developments in the residential real-estate market and the sectors directly affected — consumer discretionary shares, banking, and the like. “I think the market is pretty much just marking time and trying to establish a bottoming process after years of excess in housing and real estate,” says Alan Lancz, who runs Alan Lancz & Assoc. in Toledo, Ohio.