Organizational Transformation at Hughes Electronics Corporation
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Case Code: BSTR087 Case Length: 17 Pages Period: 1994 - 2003 Pub Date: 2004 Teaching Note: Not Available |
Price: Rs.500 Organization: Hughes Electronic Corporation Industry: Electronics & Communication, Countries : USA Themes: Business Environment |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Beginning of the Transformation
The mid-1990s saw HEC seriously consider shifting its focus to the telecommunications and media services businesses instead of the defense business. This was because the former businesses were growing rapidly. There was a strong demand for low cost solutions in the fields of mobile telephony, Internet access, entertainment and business networking and development of communications infrastructure. Customers were increasingly turning towards satellite and wireless technologies that were fast as well as cost effective. In 1994, HEC revolutionized the US satellite communication systems industry when it launched DirecTV, a digital direct broadcast satellite television service (also called as Direct-to-home or DTH television). Under this, HEC transmitted hundreds of channels to subscribers through small receiving dishes (usually 18 inches in diameter). HEC offered these services through a new subsidiary, DirecTV...
The Transformation Nears Completion
The year 2000 marked the last phase in the four year transformation process at HEC. During the year, the company made some more strategic alliances and mergers, sold certain businesses and restructured existing businesses to concentrate entirely on the media and communications business. Research conducted by HEC revealed demand for telecommunications and broadband services (provided by telecommunication companies, ISPs and business networks) was growing significantly. It also found that while its commercial satellite manufacturing business was languishing, the digital media and wireless communications businesses were growing handsomely (DirecTV had over 8 million subscribers in early 2000). Thus, in January 2000, HEC sold the space and communications business (HSC) to Boeing for $3.75 billion. This provided the company the much needed cash to fund its growing satellite TV venture DirecTV...
Coping With Difficult Times
In 2001, company research revealed that people preferred to watch television instead of spending money on expensive forms of entertainment. Therefore, HEC put in place measures to offer newer television-based services to customers. In April 2001, DirecTV acquired Telocity Inc, a US-based leading provider of broadband data services through digital subscriber lines (DSL). The company launched a new service that was a combination of Telocity's DSL Internet access and DirecTV's digital satellite entertainment services. Analysts pointed out that with the acquisition of Telocity, HEC had emerged as the only US company offering a wide portfolio of consumer entertainment and information services (including digital multi-channel television, wired and broadband Internet access). The company planned to market and distribute these services to DirecTV's existing customer base before marketing it to a new set of customers worldwide...
Where is Hughes Heading?
In March 2003, HEC ended its strategic alliance with AOL. Company sources did not reveal the reason for the break up; they simply stated that DirecTV, HNS and AOL would continue to provide Internet access to the current AOL broadband subscribers until they developed a transition plan to unbundle their services. In April 2003, GM announced that it planned to sell HEC as it wanted to exit from the satellite television business and use the proceeds from the sale to enhance its automotives businesses. Commenting on this decision, Richard Wagoner, CEO, GM, said, "Hughes will be better served under a different ownership structure." Industry observers had been expecting this move for quite some time since the media industry was going through a series of consolidations that concentrated power in a handful of global companies.
Exhibits
Exhibit I: HNS and Directv Business Growth (1994-1997)
Exhibit II: HEC - Segment Wise Financial Highlights 1995-1997
Exhibit III: HEC - Segment Wise Financial Highlights 2000-2002
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