Fallout from a strategic decision between Dish Network and EchoStar Corp. to trade a few assets is hitting home for many EchoStar employees.
Make that former EchoStar employees.
The two Douglas County-based companies are swapping certain business units that would give Dish most of the video side of EchoStar, including the rest of online video service Sling TV plus the set-top box business that includes the ground-breaking Slingbox.
The trade, announced Jan. 31, will also result in "fewer than 100" EchoStar employees losing their jobs, plus a reported end to manufacturing of Slingbox. Another 1,800 EchoStar employees will move to Dish following the trade, which was completed Tuesday.
"EchoStar implemented a small reduction in force in late January, in response to recent changes in the marketplace," said Michael T. Dugan, CEO and president of EchoStar Corporation, in a statement e-mailed to The Denver Post on Tuesday. "This reduction in force has impacted fewer than 100 of our nearly 4000 employees. We came to this decision after a careful review of our options, realizing a number of good people would be affected."
The 1,800 EchoStar employees transferring to Dish will mostly stay put inside the Inverness headquarters due to space limitations at Dish's headquarters, said Janet Gipson, with EchoStar Technologies. In its annual report , EchoStar said the trade is expected to be completed by March 31. Dish employed 16,000 people at the end of 2016. The two companies announced Wednesday that the deal was completed February 28.
EchoStar also acknowledged that it terminated two office leases in 2016, one near its headquarters at 90 Inverness Circle East and a sublease in Atlanta. In October, EchoStar told Georgia Department of Economic Development that it would shut down its Atlanta engineering office, which eliminated 137 employees, according to a report by The Atlanta Journal Constitution .
No similar filings have been made in Colorado or California, where there are rumors of more job cuts. In Cheyenne, where Dish opened its first broadcast center in 1996, Hayley McKee, with the Wyoming Department of Workforce Services, said the filing for the federal Worker Adjustment and Retraining Notification Act was considered confidential by the state.
EchoStar declined to comment on the possibility of additional layoffs.
EchoStar and Dish have long been intertwined. EchoStar came first in 1980, with co-founders Jim DeFranco and Charlie and Candy Ergen hauling a dish antenna on a pickup to a customer in Colorado. A gust of wind blew the antenna — "half the company" — off the trailer into a ditch, according to a story posted on Dish's website .
In 1995, EchoStar launched its first satellite. A year later, Dish got its start with the first broadcast delivered to customers from its Digital Broadcast Center in Cheyenne.
EchoStar later changed its name to Dish and spun off EchoStar Holding Corp in 2008, with Dish taking the satellite TV service and EchoStar keeping the technology and hardware, like set-top boxes and satellites.
A key acquisition in 2007 brought Sling Media into EchoStar's household. Sling is the company behind Slingbox, a device that lets consumers tap into their home DVR. The remote-viewing technology was added to mobile apps and DVRs, including Dish's award-winning Hopper DVR . According to Sling Media's site, it has 300 employees and is based in Foster City, Calif.
EchoStar continued to invest in big deals. The biggest may be its $2 billion acquisition in 2011 of Hughes Communications, a broadband satellite service. Charlie Ergen is currently Dish's CEO and EchoStar's chairman.
But as consumers dropped cable and satellite TV service in favor of cheaper internet video options, Dish fought the declines and launched an online-only live TV service in early 2015.
Sling TV helped boost the number of Dish's paying subscribers in its most recent quarter . And analyst Craig Moffett with MoffettNathanson now estimates Sling has 1.18 million subscribers. Dish's overall subscribers declined to 13.7 million last year.
Meanwhile, EchoStar's mix of technologies had analysts scratching their heads.
"Let's put it this way, things have changed in the pay TV world. Set-top boxes have become a smaller business, less prevalent," said Andrew DeGasperi, an analyst with Macquarie Group. "…They want to divest themselves of a business that is declining, it was hurting their valuation in the market. They wanted to simplify their corporate structure. … It was hard to value the company with the set-top business. It wasn't so clean."
DeGasperi, who recommends buying EchoStar stock, said this trade will streamline EchoStar's business and help it prepare to make an acquisition.
"I think EchoStar is positioning themselves by simplifying their corporate structure and simplifying their business to something transformative down the line," he said.
EchoStar's annual revenues have steadily declined since 2014. The company posted annual revenues of $3.06 billion in 2016, compared to $3.45 billion in 2014. Comparably, net income for the same period rose to $181.67 million, compared to $165.27 million. According to its recent financial report, Dish accounted for 52.3 percent of EchoStar's total revenue in 2016, and was EchoStar's primary customer for digital set-top boxes.
Internet video customers aren't using DVRs, because the video is pretty much available on demand. Even Sling TV is rolling out a cloud-based DVR in case certain live videos aren't available on demand.
A Slingbox M2 now costs half its launch price — $99 on Sling Media's website . While the company appears to be halting manufacture of the hardware, according to reports in Satellite Business News and Multichannel News , Slingbox users will continue to be supported, said Gipson, with EchoStar Technologies.
"We're continuing to support Sling as a service because, as you know, there are millions of subscribers on Dish Network," she said.
EchoStar Technologies, the unit to be integrated into Dish, saw its annual revenue decline $49 million to $1.2 billion due to selling $50 million less in equipment to Dish. Earnings before taxes and other interest declined 16.1 percent to $89.5 million in the same period.
Updated 3/1/2017 at 8:44 a.m.: Dish and EchoStar announced Wednesday, March 1, that the trade was completed on Feb. 28.
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