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With or without the EchoStar merger, Lehman Brothers analyst William Kidd sees Hughes Electronics (GMH) as a "strong buy" for investors.

"On a standalone basis, we believe GMH shares are trading at levels where we perceive reasonable valuation support and thusly, limited downside," said Kidd. "At the same time, without the benefits of a merger, on a relative basis, we believe GMH is slightly more attractively priced than EchoStar."

According to Kidd, the EchoStar/Hughes merger is more probable than perceived, with most assessing a 30 percent chance. Kidd, however, offers a 50 percent chance for the merger's approval. "Having spent more time with Hughes management as well as witnessing a tidbit of the process, we are becoming increasingly more optimistic that the combination will be approved by regulators," said Kidd.

Kidd noted that in a "consistent thesis," rural subscriber growth has decreased but "less penetrated urban regions" have strengthened. Presently, the solid growth seen in some markets is partially accredited to local TV's offerings in certain DMAs. "In the past year, this thesis has grown more persuasive, backed by affirmative indications," said Kidd. "However, quantification or firm statistics has generally been somewhat elusive. Accordingly, when we recently saw the data published by SkyTRENDS in their 2002 Annual Report, we felt it was worth highlighting. '...dishes recorded a near 20 percent growth rate in the year from June 2000 to June 2001.'"

From SkyReport (Used with Permission)
 
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