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EchoStar and GM Hughes ground merger

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Satellite broadcasters EchoStar (NASDAQ:DISH) $21.48 +12.3% and Hughes Electronic (NYSE:GMH) $11.09 -1.85% formally announced the termination of their attempted merger, which had faced opposition ever since it was announced last year. Both the Department of Justice and the Federal Communications Commission moved to block the $19 billion merger, which would have combined the nation's leading satellite-TV providers.

Terms of the cancelled mergers call for EchoStar (DISH) to pay Hughes (GMH) a $600 million breakup fee, but DISH will not have to buy PanAmSat (NASDAQ:SPOT) $15.07 -20.9%, and Hughes will retain its 81% ownership stake in the company.

EchoStar owns and operates Dish Network, that nation's number 2 satellite-TV provider with 7.78 million subscribers, while Hughes operates the nations top satellite-TV network, which serves more than 10.9 million subscribers.

The grounded launch of the EchoStar/Hughes merger now raised the likelihood that Rupert Murdoch's News Corp. (NYSE:NWS) $26.48 -0.15% will revive its bid for Hughes' DirecTV. Last year, Murdoch dropped his campaign to acquire DirecTV after EchoStar made its unsolicited bid.

Equity market show some mixed results as the major market indexes hold marginal gains as the Federal Open Market Committee (FOMC) begin their final meeting of 2002.

Technology stocks rebound from yesterday's beating with the CBOE Internet Index (INX.X) 91.51 +5.15% and Fiber Optic Index (FOP.X) 48.14 +4.26% leading gains.

Sector weakness is being found in the Gold/Silver Index (XAU.X) 68.69. As mentioned in recent update, formidable technical resistance forms just under the 72 level and the sector looks to take a rest after a third failed attempt to trade 72 since late September. Also week is the Dow Jones US Home Construction Index (DJUSHB) 287.67 -2.33%. In last week's market monitor, I profiled a bearish trade in home builder KB Homes (NYSE:KBH) $39.90 -5.06% should the stock give a triple-bottom sell signal at $41, and that took place early this morning. It is also notable that today's trade at $40 has the stock's point and figure chart also triggering a spread-triple-bottom sell signal. First sign of strength where a bearish trader can follow with a stop is $46, while bearish target would be the bearish vertical count of $32.

Jeff Bailey

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