Sector Spotlight: EchoStar, DirecTV and the Spoiler Role

EchoStar Communications (DISH Quote) may not be the biggest player in the home-satellite business in the U.S., but it certainly knows how to throw its weight around.

EchoStar, which operates the Dish Network home-satellite service, is running a distant second -- as judged by subscribers and revenues -- to Hughes Electronics (GMH Quote) and its DirecTV service. But thanks in part to improved results in the first quarter ended March 31, EchoStar is gaining momentum to derail a merger deal its rival contemplates -- or at least make Hughes' life more difficult.

The interplay between EchoStar, Hughes and Rupert Murdoch-controlled News Corp. (NWS Quote) -- which is hoping to acquire the DirecTV direct broadcast satellite service -- raises a crucial question commonly asked by investors in tech-related stocks: Is it a winner-take-all market, or can a second-place company survive in the shadow of the leader?

On Friday, EchoStar closed up $1.58 to $38.51. The company's shares are up $6.21, or 19%, since it reported first-quarter results before Thursday's market opening. Hughes, which trades as a tracking stock of General Motors (GM Quote), dropped 5 cents Friday to close at $22.88.

Looking Good

...