Organizational Transformation at Hughes Electronics Corporation

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Case Details:

Case Code : BSTR087
Case Length : 17 Pages
Period : 1994 - 2003
Organization : Hughes Electronic Corporation
Pub Date : 2004
Teaching Note :Not Available
Countries : USA
Industry : Electronics & Communication

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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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.


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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