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posted asecond-quarter profit Tuesday and set plans to buyback up to $1 billion in stock.

The Englewood, Colo., provider of satellitetelevision service said earnings for the quarter endedJune 30 fell to $85 million, or 18 cents a share, fromthe year-ago $129 million, or 27 cents a share.Revenue rose 26% from a year ago to $1.78 billion.

The latest-quarter numbers fell shy of WallStreet's bottom-line expectations of 22 cents pershare, but were above the Thomson First Call analystrevenue estimate of $1.67 billion.

On Tuesday afternoon, shares of EchoStar were up$1.74, or 6.4%, at $29.

Earnings before interest, taxes, depreciation andamortization -- a widely followed cash flow measure --amounted to $296 million, just shy of the $298 millionFirst Call median forecast.

EchoStar, operator of the Dish Network satelliteservice, added 340,000 net new subscribers during thesecond quarter, giving it a total of 10.1 million atJune 30. That's ahead of the 299,000 consensusestimate compiled by Schwab SoundView, but not quitethe blowout performance posted by




, which

added 455,000 customers in theJune quarter rather than the less-than-300,000subscribers that analysts had expected.

In any case, EchoStar and DirecTV are postingstrong subscriber gains, while their big cable rivalsmostly lost basic subscribers in the latest period.And, as was the case with DirecTV, Wall Street appearshappy to overlook a bottom-line miss givensubscription growth numbers.

Also heartening to investors was EchoStar's gainin average monthly revenue per subscriber, or ARPU --an area in which EchoStar has clearly lagged behindDirecTV. ARPU amounted to $55.59 in the second quarterfor EchoStar, up from $51.69 a year ago but still adistant second next to DirecTV's $65 in the latestquarter.

On a conference call with analysts Tuesday, EchoStar CEO Charlie Ergen complimented DirecTV on its "pretty incredible performance" in adding subscribers. But he said that EchoStar spent only a fraction of what DirecTV spent to retain old customers, and indicating he thought it was a poor choice to overspend on retention marketing to cut EchoStar's rate of subscriber cancellations -- 1.7% a month -- which is higher than DirecTV's. "We can get our churn down to 1% a month," Ergen said. "But we'd bankrupt our company."

While calling EchoStar's quarter "pretty solid," Ergen said he was most disappointed by the company's customer care and subscriber related expenses, which he attributed to inefficiencies in such areas as equipment installations. "We blew $30 million last quarter on inefficiencies," Ergen said. "I hate that."

Among other issues facing the company, Ergen said EchoStar had increased its inventory of home satellite receivers so that it wouldn't relive past problems of having not enough set-top boxes to meet unpredictable consumer demand. As analysts have already pointed out, Ergen said that DirecTV's recent move to regain its distribution rights in rural markets would probably hurt EchoStar's subscriber growth in those areas.

In response to various speculative questions about strategic actions EchoStar might one day take, Ergen said he could envision EchoStar and DirecTV one day sharing satellite capacity to make it easier for them to deliver extensive local programming in high definition television. He also sketched out a scenario under which



-- the regional bell which is partnering with EchoStar in offering a bundle of voice, video and data services -- would continue the partnership even after it developed a video-capable plant comprising fiber to the home. That technology, said Ergen, might be appropriate for delivering an old movie via video on demand, while the Dish Network would be a better choice for delivering, say, a live football broadcast.

Upgrading EchoStar from a hold to buy, analystWilliam Kidd of Janney Montgomery Scott's VintageResearch was heartened by the ARPU gain and thesubscriber growth, which was accompanied by loweracquisition costs per gross new subscriber than Kiddhad expected.

"We have been quite critical of EchoStar'ssomewhat recent inability to generate ARPU growth,which we believe has been among the worst, if not theworst, among major pay television providers," Kiddwrote Tuesday. "Consequently, we interpret thisquarter's ARPU improvement ... very favorably."

Continued Kidd, "We believe analysts will beinclined to raise long-term estimates on the ARPUgain, supporting our rating change."

Subscriber acquisition cost, or SAC, as EchoStarnotes in its 10-Q, can be calculated a variety ofways. By the measure Kidd chooses, it was $576 in themost recent quarter, up from $441 a year ago but wellbelow DirecTV's $645 in the latest quarter. EchoStar'sSAC, it should be noted, is helped by the company'salliance with telco




Kidd has a price target of $38 on the stock.