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Hughes, AOL End Strategic Alliance

Ending deal for DirecTV Web service will result in a $23-million pretax charge, Hughes says.

March 04, 2003|From Bloomberg News

Hughes Electronics Corp. and AOL Time Warner Inc. on Monday ended their alliance under which Hughes' DirecTV satellite unit delivers high-speed Internet access to customers of AOL's America Online service.

Hughes, a subsidiary of General Motors Corp., will take a $23-million pretax charge against 2002 results, the company said in a Securities and Exchange Commission filing. Hughes also reduced a previously announced 2002 expense to shut down high-speed data services. The overall effect will be to widen last year's operating loss by $4.4 million to $399.1 million.

Also on Monday, DirecTV said it had decided to lay off about 80 employees. Including the latest cuts, the satellite provider has eliminated 140 jobs, or about 4% of its workforce, since the middle of February to reduce costs.

Hughes and AOL already have pulled back from their venture, started in 1999, and AOL last month sold the 80.1 million Hughes shares it acquired in the alliance.

Ending the agreement releases Hughes from an obligation to spend $1 billion on marketing and development of joint services, according to the SEC filing.

The companies have "agreed to explore the possibility of new business relationships in the future," the filing said.

Hughes also will continue to provide service to current customers "as the companies develop a transition plan to an unbundled service."

A spokesman for El Segundo-based Hughes did not return a call seeking comment.

America Online spokesman Jim Whitney declined to comment.

Hughes shares fell 7 cents to $10.12 in New York Stock Exchange trading.

Shares of New York-based AOL fell 12 cents to $11.20, also on the NYSE.

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