Murdoch Sending Mixed Signals Over Satellite Buys.

Foolish me. I thought News Corp. Chairman Rupert Murdoch called it quits last year in the U.S. direct broadcast satellite business, after a futile 16-year quest.

Now Murdoch is back in the game, as everyone's favorite candidate to buy DirecTV, the nation's largest DBS service. Speculation has mounted since General Motors Corp. recently said it is willing to sell all or part of DirecTV's parent, Hughes Electronics Corp.

An audacious buyer is required for the price. Analysts say DirecTV is worth $36 billion to $44 billion, or more than 70 percent of Hughes' total valuation.

That's a lot of money, even for the acquisitive Murdoch. His biggest purchase, by my count, is the August agreement to buy Chris-Craft Industries Inc. and two affiliates for $5.35 billion. Prior to Chris-Craft, his biggest acquisition was New World Communications Group Inc. for $3.4 billion.

But Murdoch may soon have fresh currency. News Corp. is readying an initial public offering for Sky Global Networks Inc., which folds in News Corp.'s diverse satellite TV services and related businesses.

Sky Global could be valued at between $23 billion and $25 billion, according to analysts' estimates. The roadshow to market the stock to big investors is expected in October.

Since 1989, Murdoch has managed to circle most, but not all, of the globe with satellites to beam news, entertainment and sports to TV households. The most glaring gap is North America, where Murdoch never succeeded in starting a satellite service. He was too late to the market with a viable venture.

Murdoch wound up selling never-launched assets to EchoStar Communications Corp. in 1999, in exchange for a passive stake. News Corp. sold many of its EchoStar shares during a price run-up in November.

Does Sky Global need to fill its North American void? There are two schools of thought. One urges Murdoch to buy or recruit a U.S. partner to make Sky Global truly global. News Corp.'s satellite ventures already cover Europe, India, Greater China and other regions in Asia, the Middle East and Latin America.

Never mind that these services lose money. With the inclusion of North America, Murdoch could bargain more forcefully with program suppliers.

Trying to gain clout

The other school would urge Murdoch to pass on DirecTV (or its smaller competitor, EchoStar) because he doesn't really need it. Murdoch already has a strong presence in the U.S. With the addition of Chris-Craft's 10 TV stations, News Corp.'s 83 percent-owned Fox Entertainment Group will own stations with a larger national audience than any other U.S. broadcaster.

In recent years, Murdoch has beefed up his cable TV programming with the addition of 24-hour news, regional sports networks and stakes in special-interest networks such as National Geographic Channel and the Health Network.

Still, there's no denying that Murdoch would gain bargaining power to start new TV channels if he controlled DirecTV, which is expected to have almost 10 million subscribers by year-end. Only two cable TV giants, AT&T Corp. and Time Warner Inc., have higher subscriber numbers.

The question, of course, is whether newly issued shares of Sky Global would appeal to the conservative GM board. Over the years, Murdoch has gained a reputation for bold investments, without much concern for quarterly results. And who can forget that News Corp. teetered in 1990, after a spate of acquisitions?

"It's not just whether the board is willing to hold Sky paper, but whether the pension fund is willing to hold Sky paper," says Tom Eagan, an analyst with PaineWebber Inc.

But GM is under pressure to maximize the value of its Hughes subsidiary. Last month, financier Carl Icahn notified GM of his intent to buy more than $15 million of the automaker's common stock. GM Chairman Jack Smith insisted last week that GM won't be hurried by Icahn in its decisions about Hughes.

"We started down that road before Carl Icahn came along," Smith said at a meeting hosted by the Economic Club of Detroit.

Indeed, GM sought to placate restive investors with an exchange offer in May that reduced its stake in Hughes' tracking stock to 30 percent from 62 percent.

One possible scenario: GM could sell its remaining 30 percent to Sky Global or some other suitor. At current prices, GM's stake would sell for $9 billion before any premium. How such a deal would suit other Hughes shareholders is a different question.

Others in the hunt

Analysts at Credit Suisse First Boston said Walt Disney Co. and Viacom Inc. are also believed to be interested in DirecTV.

Like Fox, Disney and Viacom own broadcast companies but no cable TV systems in the United States. DirecTV would instantly bestow access to 10 million subscribers and create opportunities for interactive television and data transmission, if some new technological initiatives take hold.

But that might require more investment in hardware than either Disney Chairman Michael Eisner or Viacom Chairman Sumner Redstone desires. Each has generally favored "content" investments more than distribution systems.

By contrast, Liberty Media Corp. Chairman John Malone relishes technology. But a Malone bid for DirecTV might run afoul of government regulators because of his affiliation with AT&T, which bought his former cable TV company. In 1998, the U.S. Justice Department blocked Malone from acquiring Murdoch's stillborn American Sky Broadcasting satellite venture because of anti-competitive concerns.

For the next few weeks, News Corp. will wait quietly while rival bidders assess DirecTV. News Corp. wants to proceed with the Sky Global offering without delay, explains one Murdoch confidant.

And why should Murdoch worry? In the past, he's behaved coolly at the outset, only to swoop in with a winning bid. That's what happened in 1996, when he snatched New World Communications Group from merger talks with King World Productions Inc. He passed initially on Chris-Craft, only to resurface in August to outbid Viacom.

What Murdoch wants, he often gets.