2nd UPDATE: Dish 4Q Profit Up; EchoStar Swings To Profit

Dish Network Corp.'s (DISH) shift to a higher quality base of customers yielded a 41% increase in fourth-quarter earnings, but also led to a third-straight quarter of subscriber losses.

Dish is attempting to attract more affluent customers who are willing to spend more each month on video and less likely cancel their service, emulating rival DirecTV Group Inc. (DTV), which Wednesday reported stronger profit and customer growth during the same period. It marked a reversal of its prior strategy to sign up lower end customers, who were hit during the economic downturn.

"The results reported by Dish Network today bear almost no resemblance to the stellar quarterly performance reported by peer DirecTV just a day ago," said Craig Moffett, an analyst at Sanford C. Bernstein & Co. LLC.

While DirecTV pointed to cable as a major source of its customer growth, Dish's weakness suggests Dish was a likely contributor to DirecTV's customer growth as well. Dish lost 156,000 subscribers in the fourth quarter, leaving its customer base at 14.1 million. It had posted five consecutive quarters of customer growth before the defections began in the second quarter.

Chief Executive Charles Ergen said the company would be selective in adding customers that can pay off in the long term.

"Its not a given that you go after every customer that wants your service today," he told analysts Thursday.

Dish is in the middle of raising the monthly rates for its service. The company has also pulled back on offering aggressive discounts and promotions.

The company reported a profit of $252 million, or 56 cents a share, up from $179 million, or 40 cents, a year earlier. Revenue jumped 8.2% to $3.21 billion.

Analysts polled by Thomson Reuters had most recently forecast earnings of 54 cents on $3.21 billion in revenue.

The company said in its Securities and Exchange Commission filing that its work force at the end of the fourth quarter was 22,000, down 10% from a year ago.

Chief Operating Officer Bernard Han said there remains room for operational improvement. The company is in "the fifth inning" of its effort, he said.

Meanwhile, EchoStar Corp. (SATS)--the maker of set-top boxes that was spun off from Dish at the beginning of 2008--posted a profit of $169 million, or $1.98 a share, from a year-earlier loss of $30 million, or 37 cents a share. Revenue dropped 8% to $513 million.

Analysts polled by Thomson Reuters had most recently forecast $595 million in revenue.

Dish and former subsidiary EchoStar have both made significant acquisitions of late, with EchoStar earlier this month saying it would buy Hughes Communications Inc. (HUGH) for about $1.35 billion, while Dish said it would buy satellite company DBSD North America Inc. out of bankruptcy for about $1 billion.

The acquisitions stitch together a valuable swatch of spectrum. Ergen said he looks at each bit of spectrum individually, but said they have value when put together. He didn't provide more details on what he plans to do with the spectrum.

Dish shares fell by 55 cents to $22.38 in recent trading. EchoStar was up $1.11 at $32.58.

-By Roger Cheng, Dow Jones Newswires; 212-416-2153; roger.cheng@dowjones.com

--Nathan Becker contributed to this article.

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