SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report
(Date of earliest event reported) January 13, 2000
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HUGHES ELECTRONICS CORPORATIONON
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(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 0-26035 52-1106564
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or organization) File Number) Identification No.)
200 North Sepulveda Boulevard
El Segundo, California 90245
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(310) 662-9985
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(Address, including zip code, and telephone number,
including area code, of registrants' principal executive office)
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ITEM 5. OTHER EVENTS
On January 13, 2000, a news release was issued by Hughes Electronics
Corporation (Hughes) announcing the sale of their Satellite Division to Boeing.
The release is as follows:
HUGHES ANNOUNCES ACTIONS TO FOCUS COMPANY ON
HIGH-GROWTH SERVICE BUSINESSES
Satellite Systems Operations Will Be Sold to Boeing in
All Cash Transaction of $3.75 Billion
Company to Refocus Wireless Manufacturing Operations to Concentrate on
Broadband Opportunities - Expects $275 Million Charge to 4th Quarter 1999
Earnings
Remaining Operations to be Structured in Two New Sectors
Focused on Consumer Entertainment and Enterprise Communications
EL SEGUNDO, Calif., Jan. 13, 2000 - Hughes Electronics Corporation today
announced major changes in its corporate structure and business mix that are
designed to sharply focus the company's resources and management attention on
its high-growth entertainment, information and business communications services
businesses. Included in the actions are the sale of Hughes' satellite systems
operations, a strategy to discontinue certain wireless manufacturing activities
and focus on wireless broadband opportunities, and the appointment of two
top-level executives to concentrate the company's service operations on two
distinct customer groups - individual consumers, and business-to-business
"enterprise" customers.
"These strategic moves accelerate the transformation of Hughes into a
highly focused entertainment and data information services and distribution
company," said Michael T. Smith, chairman and CEO of Hughes. "We will now be in
a stronger position to fuel the growth of our high-growth service businesses,
focus more intensely on customer needs, and devote resources to the integration
of new broadband and interactive services."
Boeing to Acquire Satellite Systems Operations
In the first of the actions, Hughes and The Boeing Company today announced
that Boeing will acquire the Hughes satellite systems businesses in an all-cash
transaction of $3.75 billion.
Included in the acquisition is Hughes Space and Communications Company,
the world leader in communications satellites; Hughes Electron Dynamics, a
leading supplier of electronic components for satellites; and Spectrolab, a
premier provider of solar cells and panels for satellites. The units have a
combined workforce of about 9,000 employees, primarily in the Los Angeles area.
The operations are expected to have 1999 revenues of $2.3 billion, and currently
have a backlog of more than 36 satellites valued at more than $4 billion.
The transaction is subject to regulatory and government review, and is
expected to close by mid-year.
This acquisition will allow Boeing to take a significant step forward in
executing its strategic vision of becoming an industry leader in integrated
space and airborne information systems. The Hughes satellite business, coupled
with Boeing's already strong large-scale systems integration capabilities, will
enable Boeing to offer unparalleled integrated space, air and terrestrial
information and communications systems to its customers. Boeing anticipates
substantial growth in these large, complex systems that are often referred to as
"systems of systems" in both the commercial and government markets.
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"Vast talent and expertise resides within the Hughes satellite
manufacturing companies, and this move significantly strengthens the position of
both the Boeing and Hughes space businesses, which are highly complementary,"
Smith said.
Also as a result of the transaction, Hughes will become one of Boeing's
largest customers, with contracts in place for five HS 601 HP satellites for
PanAmSat and DIRECTV(R), and five HS 702 satellites for PanAmSat and the new
Hughes Spaceway(TM) broadband system.
Wireless Manufacturing Reduced; Investment Shifted to Broadband
At the same time, Hughes announced plans to narrow the focus of its
wireless business at Hughes Network Systems (HNS), located in Germantown,
Maryland. As a result of this decision, HNS' wireless business will focus on its
leading broadband point-to-multipoint product line and discontinue its mobile
cellular and narrowband local loop product lines. HNS will fulfill its
outstanding contractual obligations for these discontinued product lines.
Resulting from these actions, Hughes will record a fourth quarter pre-tax charge
of approximately $275 million.
Operations Consolidated to Focus on Customers
Additionally, Smith announced the promotion of two executives who will
help consolidate all operations of the company in alignment with their customer
focus -individual consumers and enterprise customers.
Eddy W. Hartenstein, Corporate Senior Vice President of Hughes and
President, DIRECTV, is promoted to Corporate Senior Executive Vice President of
the Hughes Consumer Sector, which will include DIRECTV, Galaxy Latin
America(TM), DIRECTV Japan, and the consumer marketing applications of
DirecPC(R) and Spaceway(TM). He will be headquartered at the corporate offices
in El Segundo, California.
Jack A. Shaw, Corporate Executive Vice President of Hughes and Chairman
and CEO of Hughes Network Systems, is promoted to Corporate Senior Executive
Vice President of the Hughes Enterprise Sector, which will include Hughes
Network Systems, PanAmSat, and the enterprise applications of DirecPC and
Spaceway. He will also be headquartered at the corporate offices. Shaw will be
succeeded by Pradman Kaul, who is promoted to Chairman and CEO of Hughes Network
Systems.
1999 Earnings Guidance Offered to Reflect Wireless Charge
Hughes expects the impact to fourth quarter 1999 earnings per share (EPS)
from the one-time HNS Wireless charge to be a loss of approximately $0.40 per
share. As a result, Hughes anticipates reporting a loss per share of $0.58 to
$0.60 for the quarter. Excluding the charge, Hughes expects its fourth quarter
1999 EPS to exceed the analysts' consensus, due to the company's strong
EBITDA(1) performance. The analysts' consensus anticipates a loss per share of
$0.28.
Hughes: A World Leader in Communications Services
Hughes is a world leader in the communications services industry, with
each of its units - DIRECTV, PanAmSat and Hughes Network Systems - commanding a
leadership position in the market that it serves.
DIRECTV is the world's largest direct-to-home provider of digital
entertainment programming, with more than 9 million subscribers worldwide.
DIRECTV has more than 8 million subscribers in the United States, including
customers of PRIMESTAR By DIRECTV, and in 1999 acquired a record 1.6 million net
new subscribers, a 39 percent increase over the previous record year of 1998. In
1999, DIRECTV began offering local channels and this year will roll out new
interactive and enhanced television services through alliances with
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companies including America Online (AOL), Wink, TiVo and others. With more than
800,000 subscribers, Galaxy Latin America, a 78-percent Hughes-owned partnership
with the Cisneros Group of Companies of Venezuela, is the leading provider of
direct-to-home television in Latin America, having posted three successive
record months of new subscriber growth.
PanAmSat Corporation, which is 81-percent owned by Hughes, is the world's
largest commercial operator of communications satellites and has a customer base
that includes the world's premier entertainment, communications and Internet
companies. PanAmSat recently expanded its capacity with the December 21, 1999
launch of a Hughes 702 satellite, and plans further expansion by launching six
additional satellites by early 2001.
Hughes Network Systems is the world's leading provider of enterprise
satellite-based private communications networks, with a broad, internationally
based range of customers including major oil companies, retailers and
manufacturers. Its DirecPC business, offering high-speed broadband Internet
service, will launch a joint service with AOL later this year to provide premier
"AOL Plus Via DirecPC" to Internet users. Hughes Network Systems will also
launch Spaceway, a two-way, interactive broadband service offering high-speed
data communications, beginning in 2002.
The earnings of Hughes Electronics, a unit of General Motors Corporation,
are used to calculate the earnings per share attributable to the General Motors
Class H common stock (NYSE:GMH). Visit Hughes on the World Wide Web at
www.hughes.com.
NOTE: Hughes Electronics Corporation believes that certain statements in
this press release may constitute forward-looking statements within the meaning
of The Private Securities Litigation Reform Act of 1995. When used in this press
release, the words "estimate," "plan," "project," "anticipate," "expect,"
"intend," "outlook," "believe," and other similar expressions are intended to
identify forward-looking statements and information. Actual results of Hughes
may differ materially from anticipated results as a result of certain risks and
uncertainties, which include but are not limited to those associated with:
economic conditions; demand for products and services, and market acceptance;
government action; local political or economic developments in or affecting
countries where we have international operations; our ability to obtain export
licenses; competition; our ability to achieve cost reductions; technological
risks; our ability to address the year 2000 issue; interruptions to production
attributable to causes outside our control; limitations on access to
distribution channels; the success and timelines of satellite launches; the
in-orbit performance of satellites; the ability of our customers to obtain
financing; and our ability to access capital to maintain our financial
flexibility. Hughes cautions that these important factors are not exclusive.
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1) EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is
the sum of operating profit (loss) and depreciation and amortization.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HUGHES ELECTRONICS CORPORATION
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(Registrant)
By
Date January 14, 2000 /s/Roxanne S. Austin
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(Roxanne S. Austin,
Chief Financial Officer)
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