Edgar Filing: EchoStar CORP

form10k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________ TO ________________.

Commission file number: 001-33807

EchoStar Corporation

formerly known as EchoStar Holding Corporation

(Exact name of registrant as specified in its charter)

Nevada

26-1232727

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

90 Inverness Circle E.

Englewood, Colorado

80112

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (303) 706-4444

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Name of Exchange on Which Registered

Class A common stock, $0.001 par value

The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes £ No T

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes £ No T

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes £ No T

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. £

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer £ Accelerated filer £ Non-accelerated filer T Smaller reporting company £

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes £ No T

As of June 29, 2007, the registrant’s common stock was not publicly traded.

As of February 19, 2008, the Registrant’s outstanding common stock consisted of 42,026,585 shares of Class A common stock and 47,687,041 shares of Class B common stock, each $0.001 par value.

DOCUMENTS INCORPORATED BY REFERENCE

The following documents are incorporated into this Form 10-K by reference:

Portions of the Registrant’s definitive Proxy Statement to be filed in connection with its 2008 Annual Meeting of Shareholders are incorporated by reference in Part III.

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	PART I

Disclosure regarding forward-looking statements		i
Item 1.	Business	1
Item 1A.	Risk Factors	23
Item 1B.	Unresolved Staff Comments	36
Item 2.	Properties	36
Item 3.	Legal Proceedings	37
Item 4.	Submission of Matters to a Vote of Security Holders	40

	PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Mattersand Issuer Purchases of Equity Securities
Item 6.	Selected Financial Data	40
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	60
Item 8.	Financial Statements and Supplementary Data	61
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	61
Item 9A.	Controls and Procedures	61
Item 9B.	Other Information	61

	PART III

Item 10.	Directors, Executive Officers and Corporate Governance	61
Item 11.	Executive Compensation	62
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	62
Item 13.	Certain Relationships and Related Transactions, and Director Independence	62
Item 14.	Principal Accountant Fees and Services	62

	PART IV

Item 15.	Exhibits and Financial Statement Schedules	62

	Signatures	66
	Index to Combined Financial Tables	F-1

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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

We make “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 throughout this report. Whenever you read a statement that is not simply a statement of historical fact (such as when we describe what we “believe,” “intend,” “plan,” “estimate,” “expect” or “anticipate” will occur and other similar statements), you must remember that our expectations may not be correct, even though we believe they are reasonable. We do not guarantee that any future transactions or events described herein will happen as described or that they will happen at all. You should read this report completely and with the understanding that actual future results may be materially different from what we expect. Whether actual events or results will conform with our expectations and predictions is subject to a number of risks and uncertainties. For further discussion see Item 1A. Risk Factors. The risks and uncertainties include, but are not limited to, the following:

We may not realize the potential benefits that we expect from our separation (“Spin-off”) from DISH Network. Certain of these benefits depend upon market acceptance of our separation from DISH Network which we cannot predict and which may be affected by significant cross-ownership by our Chairman and Chief Executive Officer as well as interlocks between management and the board of directors of us and DISH Network.

We will incur significant costs as a newly independent company, which may exceed our estimates. There will also be negative effects arising from our separation from DISH Network, including loss of access to its financial resources.

We currently depend on DISH Network and Bell ExpressVu for substantially all of our revenue, and the loss of, or a significant reduction in orders from, or a decrease in selling prices of set-top boxes to either of these two customers would significantly reduce our revenue and adversely impact our operating results.

We currently have substantial unused satellite capacity. Future costs associated with this excess capacity will negatively impact our margins if we do not generate revenue to offset these costs. In addition, because a substantial portion of the capacity of each of our AMC-15, AMC-16 and EchoStar IX satellites remains without long-term anticipated use by DISH Network, there is a significant risk that in the future, in addition to reporting lower than expected revenues and profitability we could be required to record a substantial impairment charge relating to one or more of these satellites. We currently estimate that these potential charges could aggregate up to $250 million, which, if incurred would have a material adverse effect on our reported operating results and financial position.

Our historical combined financial information included in this report is not indicative of our future financial position, future results of operations or future cash flows, nor does it reflect what our financial position, results of operations or cash flows would have been as a stand-alone company during the periods presented. We were not profitable during the years ended December 31, 2007, 2006 and 2005, as our operations have historically been dedicated primarily to support DISH Network and we provided our products and services to DISH Network at cost.

We may face actual or perceived conflicts of interest with DISH Network in a number of areas relating to our past and ongoing relationships, including (i) cross-officerships, directorships and stock ownership, (ii) intercompany transactions, (iii) intercompany agreements, and (iv) business responsibilities.

Our ability to decrease our losses or to generate revenues will depend in part on our ability to grow our business. This may require significant additional capital that may not be available on terms that would be attractive to us or at all. In particular, current dislocations in the credit markets, which have significantly impacted the availability and pricing of financing, particularly in the high yield debt and leveraged credit markets, may significantly constrain our ability to obtain financing to support our growth initiatives. These developments in the credit markets may have a significant effect on our cost of financing and our liquidity position and may, as a result, cause us to defer or abandon profitable business strategies that we would otherwise pursue if financing were available on acceptable terms.

We may also use a significant portion of our existing cash and marketable securities to fund stock buyback programs. Our board of directors has approved a program in which we may repurchase up to $1.0 billion of our Class A common stock during 2008.

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If DISH Network enters into a business combination transaction, or if Mr. Ergen no longer controls a majority of the voting power of DISH Network or of us, our relationship with DISH Network could be terminated or substantially curtailed with little or no advance notice. Any material reduction in our sales to DISH Network as a result of a change in control of DISH Network would have a significant material adverse effect on our business and financial position.

Our future success may depend on our ability to identify and successfully exploit opportunities to acquire other businesses or technologies to complement, enhance or expand our current business or products or otherwise offer us growth opportunities. We may not be able to pursue these growth opportunities successfully.

We have entered into certain strategic transactions and investments, and we may increase our strategic investment activity in the United States and in international markets. These investments, which we believe could become substantial over time, involve a high degree of risk, are concentrated in a few companies and could expose us to significant financial losses if the underlying ventures are not successful. These investments may also cause us to defer or suspend share repurchases.

Our business relies on intellectual property, some of which is owned by third parties, and we may inadvertently infringe their patents and proprietary rights. We may be required to cease developing or marketing infringing products, to obtain licenses from the holders of the intellectual property at a material cost, or to redesign those products in such a way as to avoid infringing the patent claims of others.

We depend on sales of set-top boxes for nearly all of our revenue, and if sales of our set-top boxes decline, our business and financial position will suffer.

Our commercial success in selling our set-top boxes to cable television operators depends significantly on our ability to obtain licenses to use the conditional access systems deployed by these operators in our set-top boxes. The owners of these conditional access systems are in many cases competitors of ours. There can be no assurance we will be able to obtain such licenses on acceptable terms or at all.

In order to grow our revenue and business and to build a large customer base, we believe we will be required to increase our sales of set-top boxes in international markets. We have limited experience selling our set-top boxes internationally. To succeed in expanding these sales efforts, we believe we must hire additional sales personnel and develop and manage new relationships with cable operators and other providers of digital television in international markets.

Our set-top boxes are extremely complex and can have defects in design, manufacture or associated software. We could incur significant expenses, lost revenue, and reputational harm if we fail to detect or effectively address such issues through design, testing or warranty repairs.

If we are unsuccessful in subsequent appeals in the Tivo case or in defending against claims that our alternate technology infringes on Tivo’s patent, we could be prohibited from distributing DVRs or be required to modify or eliminate certain user-friendly DVR features that we currently offer to consumers. The adverse affect on our business could be material. To the extent that DISH Network does not indemnify us, we could also have to pay substantial additional damages.

The fixed satellite services industry is highly competitive and is characterized by long-term leases and high switching costs. It will be difficult to displace customers from their current relationships with our competitors and we may face competition from others in the future.

Satellites are subject to significant operational risks while in orbit. While we believe that our satellite fleet is generally in good condition, certain satellites in our fleet have experienced malfunctions or anomalies, some of which have had a significant adverse impact on their commercial operation. There can be no assurance that we can recover critical transmission capacity in the event one or more of our in-orbit satellites were to fail. Therefore, the loss of a satellite or other satellite malfunctions or anomalies could have a material adverse effect on us.

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We are subject to comprehensive governmental regulation by the FCC for our domestic satellite operations. We are also regulated by other federal agencies, state and local authorities and the International Telecommunication Union. Domestic and international regulations regarding the licensing, authorization and operations of satellite communications providers may restrict our fixed satellite services operations.

We do not anticipate carrying insurance for any of the in-orbit satellites that we will own, and we will bear the risk of any failures in our in-orbit satellites. Because we bear this risk, failures in our in-orbit satellites could have a material adverse effect on our reported operating results and financial position.

We may face other risks described from time to time in periodic and current reports we file with the Securities and Exchange Commission (“SEC”).

All cautionary statements made herein should be read as being applicable to all forward-looking statements wherever they appear. In this connection, investors should consider the risks described herein and should not place undue reliance on any forward-looking statements. We assume no responsibility for updating forward-looking information contained or incorporated by reference herein or in other reports we file with the SEC.

In this report, the words “EchoStar,” the “Company,” “we,” “our” and “us” refer to EchoStar Corporation and its subsidiaries, unless the context otherwise requires. The words “DISH Network,” refers to DISH Network Corporation and its subsidiaries, unless the context otherwise requires.

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PART I

Item 1.

BUSINESS

OVERVIEW

Our Business

EchoStar Corporation (“EchoStar,” the “Company,” “we,” “us” and/or “our”), formerly known as EchoStar Holding Corporation, is a newly formed entity which had not conducted any operations prior to its Spin-off from DISH Network on January 1, 2008. We were incorporated in Nevada on October 12, 2007 to effect the Spin-off. We had no material assets or activities as a separate corporate entity until the contribution of assets to us by DISH Network immediately prior to the completion of the Spin-off. We have historically operated a digital set-top box business that comprises substantially all of our historical revenue. We intend to develop a fixed satellite services business using our fleet of owned and leased in-orbit satellites.

Our set-top box business designs, develops and distributes set-top boxes and related products for direct-to-home (”DTH”) satellite service providers. Most of our set-top boxes are sold to DISH Network, but we also sell a significant number of set-top boxes to Bell ExpressVu and other international customers. We currently employ over 700 engineers in our set-top box and related businesses.

We intend to develop our fixed satellite services business using our eight owned or leased in-orbit satellites and related FCC licenses, a network of seven full service digital broadcast centers, and leased fiber optic capacity with points of presence in approximately 150 cities. We expect that our primary customer initially will be DISH Network. However, we also expect to lease capacity in the spot market and to government and enterprise customers.

We have entered into commercial agreements with DISH Network pursuant to which we will have the obligation to sell set-top boxes and related products and provide fixed satellite services to DISH Network at set prices for a period of two years. However, DISH Network is under no obligation to purchase our set-top boxes and related products during or after this two-year period and DISH Network may terminate the agreements to receive fixed satellite services upon 60 days notice.

As part of DISH Network, we competed with many of our potential customers. We believe our separation from DISH Network may expand our opportunities to enter into commercial relationships with these and other new customers, although there can be no assurance that we will be successful in entering into any of these commercial relationships.

Other Information

We were organized in October 2007 as a corporation under the laws of the State of Nevada. Our Class A common stock is publicly traded on the Nasdaq Global Select Market under the symbol “SATS.” Our principal executive offices are located at 90 Inverness Circle E., Englewood, Colorado 80112 and our telephone number is (303) 706-4444.

We were formerly a wholly-owned subsidiary of DISH Network. On September 25, 2007, DISH Network announced its intention to pursue the disposition of 100% of its shareholdings in us through a tax-free distribution to DISH Network’s shareholders. Effective as of the distribution date of January 1, 2008, DISH Network completed the distribution of our common shares to its shareholders. The distribution was effectuated through a pro-rata dividend to DISH Network’s shareholders consisting of 0.20 of a share of the same class of our common stock for each share of common stock owned by DISH Network shareholders on December 27, 2007, the record date for the Spin-off.

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Our Relationship with Dish Network

Following the Spin-off, our company and DISH Network will operate independently, and neither will have any ownership interest in the other. In order to govern certain of the ongoing relationships between our company and DISH Network after the Spin-off and to provide mechanisms for an orderly transition, we and DISH Network entered into certain agreements pursuant to which we will obtain certain services and rights from DISH Network, DISH Network will obtain certain services and rights from us, and we and DISH Network will indemnify each other against certain liabilities arising from our respective businesses. The key terms of these agreements are summarized under “Certain Intercompany Agreements” set forth in our Proxy Statement for the 2008 Annual Meeting of Shareholders under the caption “Certain Relationships and Related Transactions.”

In the near term, we expect that DISH Network will remain our principal customer. Pursuant to the commercial agreements we entered into with DISH Network, we will sell equipment, including set-top boxes to DISH Network and we will provide broadcast services and other products and services to DISH Network, in each case at cost plus an additional amount equal to an agreed percentage of our cost, which will vary depending on the nature of the products and services provided. We determined that, on a pro forma basis, the weighted average margin over cost for these sales was approximately 13.1% for the year ended December 31, 2007. This margin over cost was determined based on specific margins over cost for various categories of equipment that we sold to DISH Network in the relevant period, applying in each case the applicable margin over cost as to which we and DISH Network agreed pursuant to our commercial agreements. Because of continual advancements in the technology and functionality of the equipment and services we will provide to DISH Network as well as DISH Network’s right under our commercial agreements to terminate on 60 days’ notice, the implied margins derived from our pro forma financial statements do not necessarily reflect the margins we will earn on equipment sales to DISH Network in the future, and we expect that the margins we will earn on sales to DISH Network in the future will likely be based largely on the results of periodic negotiations between us and DISH Network that will reflect, among other things, the equipment and services that best meet DISH Network’s then current needs and its sales and marketing priorities, the product and service alternatives available to DISH Network from other suppliers, and our ability to respond to DISH Network ’s requirements and to continue to differentiate ourselves from other suppliers on bases other than pricing.

BUSINESS SEGMENTS

We will operate two primary businesses, a digital set-top box business and a fixed satellite services business. Our set-top box business designs, develops and distributes set-top boxes and related products primarily for satellite service providers and consumers. Our fixed satellite services business will be developed using assets which were contributed to us by DISH Network in connection with the Spin-off.

Digital Set-Top Business

Set-top Boxes and Related Products

Our set-top boxes permit consumers to watch, control and record television programming through digital video recorder, or DVR, technology integrated with satellite receivers. Certain of our set-top boxes are also capable of incorporating internet protocol television, or IPTV, functionality, which allows consumers to download movies, music and other content from the internet through an Ethernet connection.

Our current set-top box lineup includes:

Standard-definition (“SD”) basic digital set-top boxes: These devices allow consumers who subscribe to television service from multi-channel video distributors to access encrypted digital video and audio content and make use of a variety of interactive applications. These applications include an on-screen interactive program guide, pay-per-view offerings, the ability to support V-chip type technology, games and shopping and parental control.

SD-DVR digital set-top boxes: In addition to the functionality of a SD basic digital set-top box, these devices enable subscribers to pause, stop, reverse, fast forward, record and replay live or recorded digital television content using a built-in hard drive capable of storing up to 200 hours of content. They also include the ability to support video-on-demand, or VOD, services.

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·	High-Definition (“HD”) digital set-top boxes: These devices enable subscribers to access the enhanced picture quality and sound of high-definition content, in addition to the functionality of a SD digital set-top box.

HD-DVR digital set-top boxes: These devices combine the functionality of the HD set-top box and the DVR digital set-top box into a single device. Our most-advanced HD-DVR set-top boxes are capable of storing up to 350 hours of SD, or 55 hours of HD, content, contain IPTV functionality, and allow users to greatly increase their DVR storage capacity through the use of external hard drives.

In addition to set-top boxes we also design and develop related products such as satellite dishes, remote controls and other devices and accessories, and we will soon begin offering new digital-to-analog converter boxes, which will allow consumers to view, record and play back local over-the-air analog and digital broadcasts on analog TV sets.

Sling Media

Sling Media, Inc. (“Sling Media”) was acquired in October 2007 by Dish Network and was transferred to us as part of the Spin-off. Sling Media is the maker of the Slingbox™, which allows consumers to watch and control their television programming at any time, from any location, using personal computers, personal digital assistants, smartphones and other digital media devices.

Fixed Satellite Services

We operate six owned and two leased in-orbit satellites. We also have one owned and one leased satellite under construction.

We also operate a number of digital broadcast centers in the United States. Our principal digital broadcast centers are located in Cheyenne, Wyoming and Gilbert, Arizona. We also have five regional digital broadcast centers that allow us to utilize the spot beam capabilities of our satellites. Programming and other data is received at these centers by fiber or satellite, processed, and then “uplinked” to our satellites for transmission to consumers. Equipment at our digital broadcast centers also performs compression and encryption of our customers’ programming signals.

Our transponder capacity is currently used for a variety of applications:

Broadcasting Services. We lease satellite transponder capacity to broadcasters and programmers who use our satellites to deliver their programming to U.S. cable systems and cable households. Our satellites are also used for the transmission of live sporting events and satellite news gathering services.

·	Government Services. We lease satellite capacity and provide technical services to US government agencies and contractors. We believe the U.S. government may increase its use of commercial satellites for Homeland Security, emergency response, continuing education, distance learning, and training.

Network Services. We lease satellite transponder capacity and provide terrestrial network services to corporations. These networks are dedicated private networks that allow delivery of video and data services for corporate communications. Our satellites can be used for point to point or point to multi-point one-way or two-way communications.

Satellite IP. We currently aggregate content at our digital broadcast centers and offer transport services for over 300 channels of MPEG IV IP encapsulated standard-definition and high-definition programming from our satellite located at the 85 degree orbital location. We intend to offer these wholesale programming transport services to telecommunication companies, rural cable operators, local exchange carriers and wireless broadband providers.

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Other Business Opportunities

DISH Network has entered into agreements to construct and launch an S-band satellite and to lease its transponder capacity to a Hong Kong joint venture, which in turn will sublease a portion of such transponder capacity to an affiliate of a Chinese governmental entity to support the development of satellite-delivered mobile video services in China. DISH Network also has recently completed several other strategic investments, and we intend to evaluate new strategic development opportunities both in the United States and in other international markets. These investments have been transferred to us as part of the Spin-off, and are part of our strategy to expand our business and support the development of new satellite-delivered services, such as mobile video services. The expertise we obtain through these investments may also help us to improve and expand the services that we provide to our existing customers.

However, these investments involve many significant risks, including, among other things, the risks that required regulatory approvals and other conditions may not be obtained or satisfied, that we may not be able to enter into necessary distribution and other relationships, and that the companies in which we invest or with whom we partner may not be able to compete effectively in their markets or that there may be insufficient demand for the new services planned by these companies.

During 2007 DISH Network participated in an FCC auction for licenses in the 1.4 GHz band and was the winning bidder for several licenses with total winning bids of $57 million. DISH Network transferred these licenses to us in the Spin-off. Subsequent to the Spin-off, as described below, we entered into a commercial agreement with TerreStar Corporation and TerreStar Networks Inc. regarding these licenses.

On February 7, 2008, we completed several transactions under a Master Investment Agreement, dated as of February 5, 2008 between us on the one hand, and TerreStar Corporation and TerreStar Networks on the other hand. Under the Master Investment Agreement, we acquired $50 million in aggregate principal amount of TerreStar Networks’ 6½% Senior Exchangeable Paid-in-Kind Notes due June 15, 2014; and $50 million aggregate principal amount of TerreStar Networks’ 15% Senior Secured Paid-in-Kind Notes due February 15, 2014.

The Exchangeable Notes are guaranteed by TerreStar License Inc. and TerreStar National Services, Inc. and will mature on June 15, 2014. The Exchangeable Notes are exchangeable for shares of TerreStar Corporation common stock based on a price of $5.57 per share following effectiveness of TerreStar Corporation stockholder approval. TerreStar Networks may be obligated to repurchase all or a part of the Exchangeable Notes under certain circumstances, including upon a change of control of TerreStar Networks or if stockholder approval of the issuance of TerreStar Corporation common stock is not effective by July 23, 2008. The Exchange Notes will bear interest at 6.5% per annum, with such interest being payable in additional Exchangeable Notes through March 2011. Additional cash interest may be payable in the event that certain milestones leading to the effectiveness of the stockholder approval are not met.

We also entered into a Purchase Money Credit Agreement with TerreStar and Harbinger Capital Partners Master Fund I, Ltd. and Harbinger Capital Partners Special Situations Fund LP (collectively, “Harbinger”), in which we and Harbinger have each committed to provide up to $50 million in secured financing, the proceeds of which may be advanced to TerreStar Networks from time to time as required for TerreStar Networks to make required payments in connection with a communications satellite to be constructed and launched for TerreStar Networks. Pursuant to a Security Agreement, dated as of February 5, 2008, from TerreStar Networks in favor of US Bank National Association, as Collateral Agent, TerreStar Networks granted a security interest to the Collateral Agent in certain of TerreStar Networks’ assets to be financed by the proceeds of the loan, including, among other things, the communications satellite and related raw materials, work-in-progress, and finished goods.

We also entered into a Spectrum Agreement with TerreStar Corporation and TerreStar Networks. Under the Spectrum Agreement, one of our subsidiaries will enter into a lease, with TerreStar Corporation as lessee, of the 1.4 GHz spectrum that we acquired in 2007. TerreStar Corporation will also have the option exercisable on or before July 23, 2008, to acquire the intermediate holding company through which we hold the spectrum, in exchange for the issuance by TerreStar Corporation of 30 million shares of its common stock. The issuance of these common shares and exercise by TerreStar Corporation of its option will be subject to shareholder approval of the issuance of these shares.

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Our Business Strategy

Expand set-top box business to additional customers. We believe our separation from DISH Network could enhance our opportunities to sell set-top boxes to a broader group of multi-channel video distributors. Historically, many of our potential customers have perceived us as a competitor due to our affiliation with DISH Network. As a result of our recent separation from DISH Network, we believe that we could have opportunities to enter into commercial relationships with other multi-channel video distributors. There can be no assurance, however, that we will be successful in entering into any of these commercial relationships (particularly if we continue to be perceived as affiliated with DISH Network as a result of common ownership and related management).

Leverage satellite capacity and related infrastructure. Our fixed satellite services business benefits from excess satellite and fiber capacity that we believe was in large part created through innovation and operational efficiencies. While we expect that DISH Network will initially be our primary customer for fixed satellite services, we believe market opportunities exist to utilize our capacity to provide digital video distribution, satellite-delivered IP, corporate communications and government services to a broader customer base.

Offer comprehensive network infrastructure solutions. We intend to leverage our over 700 engineers to customize infrastructure solutions for a broad base of customers. For example, we could offer a customer the ability to deliver a fully integrated video programming solution, incorporating our satellite and backhaul capacity, customized set-top boxes and network design and management.

Capitalize on change in regulations. Changes in federal law and regulations applicable to the set-box industry may create opportunities for us to expand our business.

Digital transition. Congress has mandated that by February 2009 all network broadcasts be transmitted digitally, which will require households that receive over-the-air broadcast signals with an analog television to obtain a digital converter device. This digital converter device is a new product and we believe that we are in a position to develop and market devices that could allow us to effectively compete in this new market.

Removable security systems. The Federal Communications Commission, or FCC, mandated that by July 2007 cable providers use removable security modules to provide conditional access security for television content. The FCC intends for this regulation to spur competition in the retail set-top box market, providing an even playing field between leased cable set-top boxes and retail-bought, cable-ready TVs and set-top box equipment. We believe this new regulation may create an opportunity for us to compete on a more level field in the domestic market for cable set-top boxes.

Exploit international opportunities. We believe that direct-to-home satellite service is particularly well-suited for countries without extensive cable infrastructure, and we intend to continue to try to secure new customer relationships from international direct-to-home satellite service providers.

Pursue strategic partnerships, joint ventures and acquisitions. We intend to selectively pursue partnerships, joint ventures and strategic acquisition opportunities that we believe may allow us to increase our existing market share, expand into new markets, broaden our portfolio of products and intellectual property, and strengthen our relationships with our customers.

Act on the set-top box replacement cycle. The broader adoption of high definition television by consumers will require more advanced compression (e.g., MPEG-4) and security technologies within set-top boxes. This may launch a replacement cycle, particularly among direct-to-home and cable providers with substantial bases of legacy equipment, which may create additional market opportunities for us.

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Customers

Digital Set-top Box Business

Historically, the primary customer of our digital set-top box business has been DISH Network. For the fiscal years ended December 31, 2007, 2006 and 2005, DISH Network accounted for approximately 83.8%, 84.5% and 85.6% of our total historical revenue, respectively. In addition, Bell ExpressVu, a direct-to-home satellite service provider in Canada, accounted for 10.7%, 12.2% and 11.4%, respectively, of our historical total revenue for the fiscal years ended December 31, 2007, 2006 and 2005. We also currently sell our set-top boxes to other international direct-to-home satellite service providers, although these customers do not account for a significant amount of our total revenue.

In the near term, we expect to rely on DISH Network to remain the primary customer of our set-top box business and the primary source of our total revenue. We have entered into commercial agreements with DISH Network pursuant to which we are obligated to sell set-top boxes and related products to DISH Network at set prices for a period of two years. However, DISH Network is under no obligation to purchase our set-top boxes or related products during or after this two-year period. In addition, a substantial majority of our international revenue during the years ended December 31, 2007 and 2006, respectively, was attributable to sales of set-top boxes to Bell ExpressVu. We cannot provide assurance that we will continue to make sales to Bell ExpressVu at historical levels, or at all. In addition, because of the competitive nature of the set-top box business and the short-term nature of our binding purchase orders with Bell ExpressVu, we could in the future be required to reduce the average selling-prices of our set-top boxes to Bell ExpressVu, which in turn would adversely affect our gross margins and profitability. We are currently in discussions with Bell ExpressVu regarding an extension to our current arrangements for the sale of set-top boxes and there can be no assurance that these discussions will enable us to maintain our sales to Bell ExpressVu or that if we are able to maintain our sales to Bell ExpressVu that we will not be required to sell equipment at lower margins or enter into other arrangements that may affect our revenues or earnings from our Bell ExpressVu relationship.

Fixed Satellite Services

We lease transponder capacity on our satellite fleet primarily to DISH Network, but also to a small number of government and enterprise customers, telecommunications companies and other users. In the near term, due to our limited base of customers, we expect to have a substantial amount of excess capacity. For the year ended December 31, 2007, DISH Network accounted for approximately 93.9% of our pro forma total fixed satellite services revenue. We have entered into certain transitional commercial agreements with DISH Network pursuant to which we are obligated to provide DISH Network with fixed satellite services at fixed prices for up to two years. However, DISH Network may terminate these agreements upon 60 days notice. While we expect to continue to provide satellite services to DISH Network, its satellite capacity requirements may change for a variety of reasons, including DISH Network’s ability to launch its own satellites. Any termination or reduction in the services we provide to DISH Network may increase excess capacity on our satellites and require that we aggressively pursue alternative sources of revenue for this business. Our other fixed satellite service sales are generally characterized by shorter-term contracts or spot market sales.

Future costs associated with our excess capacity will negatively impact our margins if we do not generate revenue to offset these costs. In addition, because a substantial portion of the capacity of each of our AMC-15, AMC-16 and EchoStar IX satellites remains without long-term anticipated use by DISH Network, there is a significant risk that in the future, in addition to reporting lower than expected revenues and profitability, we could be required to record a substantial impairment charge relating to one or more of these satellites. We currently estimate that these potential charges could aggregate up to $250 million, which, if incurred would have a material adverse effect on our reported operating results and financial position. We performed a preliminary assessment of the recoverability of the satellites contributed by DISH Network assuming the Spin-off had been consummated and preliminarily concluded that the recoverability of the satellites was not impaired as of the distribution date.

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Marketing and Sales

Historically, our sales and marketing efforts have been limited in scope and focused on international opportunities because the majority of our products and services were provided to DISH Network pursuant to purchase orders and not long term contracts. In addition, we historically did not actively seek opportunities with other multi-channel video providers in light of our relationship with DISH Network, which is a competitor to many of these video providers. Therefore, to successfully implement our business strategy we will need to significantly expand our marketing and sales capabilities both domestically and internationally. In particular, we will need to expand our marketing and sales capabilities with domestic multi-channel video providers other than DISH Network.

Manufacturing and Material Sources

Although we design, engineer and distribute set-top boxes and related products, we are not generally engaged in the manufacturing process. Instead we outsource the manufacturing of our set-top boxes and related products to third party manufacturers who manufacture our products according to specifications supplied by us. We depend on a few manufacturers, and in some cases a single manufacturer, for the production of set-top boxes and related products. Although there can be no assurance, we do not believe that the loss of any single manufacturer would materially impact our business. Sanmina-SCI Corporation and Jabil Circuit, Inc. currently manufacture the majority of our set-top boxes.

Research and Development

For the fiscal years ended December 31, 2007, 2006 and 2005, we have invested approximately $79 million, $56 million and $46 million, respectively, in research and development primarily related to our set-top box business.

Competition

Digital Set-top box Business

As we seek to establish ourselves in the digital set-top box industry as an independent business we will face substantial competition. Many of our primary competitors, such as Motorola and Cisco, which recently acquired Scientific Atlanta, have established longstanding relationships with their customers. In addition, some of these competitors own the conditional access technology deployed by their customers, which creates an additional barrier to entry for us. We may not be able to license this technology from these competitors on favorable terms or at all. In addition, we may face competition from international developers of set-top box systems who may be able to develop and manufacture products and services at costs that are substantially lower than ours. Our ability to compete in the digital set-top box industry will also depend heavily on our ability to successfully bring new technologies to market to keep pace with our competitors.

Fixed Satellite Services Business

We compete against larger, well-established fixed satellite service companies, such as Intelsat, SES Americom and Telesat Canada, in an industry that is characterized by long-term leases and high switching costs. Therefore, it will be difficult to displace customers from their current relationships with our competitors. Intelsat and SES Americom maintain key North American orbital slots which may further limit competition and competitive pricing. In addition, our fixed satellite service business could face significant competition from suppliers of terrestrial communications capacity.

While we believe that there may be opportunities to capture new business as a result of market trends such as the digital transition and the increased communications demands of homeland security initiatives, there can be no assurance that we will be able to effectively compete against our competitors due to their significant resources and operating history.

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Satellite Fleet Overview

As discussed above, we have six owned and two leased in-orbit satellites, and one owned and one leased satellite currently under construction. While we believe that overall our satellite fleet is generally in good condition, during 2007 and prior periods certain satellites in our fleet have experienced anomalies, some of which have had a significant adverse impact on their commercial operation. There can be no assurance that we can recover critical transmission capacity in the event one or more of our in-orbit satellites were to fail. We do not anticipate carrying insurance for any of the in-orbit satellites that we will own, and we will bear the risk associated with any in-orbit satellite failures.

		Degree	Useful
	Launch	Orbital	Life/
Satellites	Date	Location	Lease Term
Owned:
EchoStar III	October 1997	61.5	12
EchoStar IV	May 1998	77	N/A
EchoStar VI	July 2000	110	12
EchoStar VIII	August 2002	110	12
EchoStar IX	August 2003	121	12
EchoStar XII	July 2003	61.5	10

Leased:
AMC-15	December 2004	105	10
AMC-16	January 2005	85	10

Under Construction:
CMBStar (owned)	Late 2008
AMC-14 (leased)	March 2008

Owned Satellites

EchoStar III. EchoStar III was originally designed to operate a maximum of 32 transponders at approximately 120 watts per channel, switchable to 16 transponders operating at over 230 watts per channel, and was equipped with a total of 44 transponders to provide redundancy. As a result of past traveling wave tube amplifier (“TWTA”) failures, only 18 transponders are currently available for use. Due to redundancy switching limitations and specific channel authorizations, we can only operate on 15 of the 19 FCC authorized frequencies at the 61.5 degree location. While we do not expect a large number of additional TWTAs to fail in any year, and the failures have not reduced the original minimum 12-year design life of the satellite, it is likely that additional TWTA failures will occur from time to time in the future, and those failures will further impact commercial operation of the satellite. See discussion of evaluation of impairment in “Long-Lived Assets” in Note 3 in the Notes to the Statement of Net Assets to be Contributed by DISH Network in Item 15 of this Annual Report on Form 10-K.

EchoStar IV. EchoStar IV currently operates at the 77 degree orbital location, which is licensed by the government of Mexico to a venture in which we hold a minority interest. The satellite was originally designed to operate a maximum of 32 transponders at approximately 120 watts per channel, switchable to 16 transponders operating at over 230 watts per channel. As a result of past TWTA failures, only six transponders are currently available for use and the satellite has been fully depreciated. There can be no assurance that further material degradation, or total loss of use, of EchoStar IV will not occur in the immediate future. See discussion of evaluation of impairment in “Long-Lived Assets” in Note 3 in the Notes to the Statement of Net Assets to be Contributed by DISH Network in Item 15 of this Annual Report on Form 10-K.

EchoStar VI. EchoStar VI was originally equipped with 108 solar array strings, approximately 102 of which are required to assure full power availability for the original minimum 12-year useful life of the satellite. Prior to 2007, EchoStar VI experienced anomalies resulting in the loss of 17 solar array strings. During the fourth quarter 2007, five additional solar array strings failed, reducing the number of functional solar array strings to 86. While the useful life of the satellite has not been affected, commercial operability has been reduced. The satellite was designed to operate 32 transponders at approximately 125 watts per channel, switchable to 16 transponders operating at approximately 225 watts per channel. The power reduction resulting from the solar array failures which currently limits us to operation of a maximum of 26 transponders in standard power mode, or 13 transponders in high power mode, is expected to decrease to 25 and 12, respectively, by September 2008. The number of transponders to which power can be provided is expected to continue to decline in the future at the rate of approximately one transponder every three years. See discussion of evaluation of impairment in “Long-Lived Assets” in Note 3 in the Notes to the Statement of Net Assets to be Contributed by DISH Network in Item 15 of this Annual Report on Form 10-K.

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EchoStar VIII. EchoStar VIII was designed to operate 32 transponders at approximately 120 watts per channel, switchable to 16 transponders operating at approximately 240 watts per channel. EchoStar VIII also includes spot-beam technology. This satellite has experienced several anomalies since launch, but none have reduced the 12-year estimated useful life of the satellite. However, there can be no assurance that future anomalies will not cause further losses which could materially impact its commercial operation, or result in a total loss of the satellite. See discussion of evaluation of impairment in “Long-Lived Assets” in Note 3 in the Notes to the Statement of Net Assets to be Contributed by DISH Network in Item 15 of this Annual Report on Form 10-K.

EchoStar IX. EchoStar IX was designed to operate 32 fixed satellite services transponders operating at approximately 110 watts per channel, along with transponders that can provide services in the Ka-Band (a “Ka-band payload”). The satellite also includes a C-band payload which is owned by a third party. Prior to 2007, EchoStar IX experienced the loss of one of its three momentum wheels, two of which are utilized during normal operations. A spare wheel was switched in at the time and the loss did not reduce the 12-year estimated useful life of the satellite. During September 2007, the satellite experienced anomalies resulting in the loss of three solar array strings. An investigation of the anomalies is continuing. The anomalies have not impacted commercial operation of the satellite to date. However, there can be no assurance future anomalies will not cause further losses, which could impact the remaining life or commercial operation of the satellite. See discussion of evaluation of impairment in “Long-Lived Assets” in Note 3 in the Notes to the Statement of Net Assets to be Contributed by DISH Network in Item 15 of this Annual Report on Form 10-K.

EchoStar XII. EchoStar XII was designed to operate 13 transponders at 270 watts per channel in CONUS mode, which provides service to the entire continental United States, or 22 spot beams using a combination of 135 and 65 watt TWTAs. We currently operate the satellite in CONUS mode. EchoStar XII has a total of 24 solar array circuits, approximately 22 of which are required to assure full power for the original minimum 12-year design life of the satellite. Since late 2004, eight solar array circuits on EchoStar XII have experienced anomalous behavior resulting in both temporary and permanent solar array circuit failures. The cause of the failures is still being investigated. The design life of the satellite has not been affected. However, these temporary and permanent failures have resulted in a reduction in power to the satellite which will preclude us from using the full complement of transponders on EchoStar XII for the 12-year design life of the satellite. The extent of this impact is being investigated. There can be no assurance future anomalies will not cause further losses, which could further impact commercial operation of the satellite or its useful life. See discussion of evaluation of impairment in “Long-Lived Assets” in Note 3 in the Notes to the Statement of Net Assets to be Contributed by DISH Network in Item 15 of this Annual Report on Form 10-K.

Leased Satellites

AMC-15. AMC-15 commenced commercial operation during January 2005 and currently operates at the 105 degree orbital location. This SES Americom fixed satellite services satellite is equipped with 24 Ku fixed satellite services transponders that operate at approximately 120 watts per channel and a Ka-band payload consisting of 12 spot beams.

AMC-16. AMC-16 commenced commercial operation during February 2005 and currently operates at the 85 degree orbital location. This SES Americom fixed satellite services satellite is equipped with 24 Ku-band transponders that operate at approximately 120 watts per channel and a Ka-band payload consisting of 12 spot beams.

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Satellites Under Construction

CMBStar. The CMBStar satellite is an S-band satellite intended to be used in our mobile video project in China and is scheduled to be completed during the second half of 2008. If the required regulatory approvals are obtained and contractual conditions are satisfied, the transponder capacity of that satellite will be leased to a Hong Kong joint venture, which in turn will sublease a portion of the transponder capacity to an affiliate of a Chinese regulatory entity. There can be no assurance that the regulatory approvals will be obtained or contractual conditions satisfied.

AMC-14. AMC-14 will launch and commence commercial operation in March 2008 at the 61.5 degree orbital location. The satellite is being equipped with transmit antennas optimized for multiple orbital locations, providing greater backup flexibility in the event certain other in-orbit satellites fail. DISH Network expects to enter into an initial ten-year lease for all of the capacity of AMC-14.

We are also parties to contracts for the construction of three additional Ka and/or Ku band satellites which are expected to be completed between 2009 and 2011.

GOVERNMENT REGULATIONS

We are subject to comprehensive regulation by the FCC for our domestic operations. We are also regulated by other federal agencies, state and local authorities and the International Telecommunication Union (“ITU”). Depending upon the circumstances, noncompliance with legislation or regulations promulgated by these entities could result in suspension or revocation of our licenses or authorizations, the termination or loss of contracts or the imposition of contractual damages, civil fines or criminal penalties.

The following summary of regulatory developments and legislation in the United States is not intended to describe all present and proposed government regulation and legislation affecting the satellite and set-top box equipment markets. Government regulations that are currently the subject of judicial or administrative proceedings, legislative hearings or administrative proposals could change our industry to varying degrees. We cannot predict either the outcome of these proceedings or any potential impact they might have on the industry or on our operations.

Regulations Applicable to Satellite Operations

FCC Jurisdiction over our Satellite Operations. The Communications Act gives the FCC broad authority to regulate the operations of satellite operators. Specifically, the Communications Act gives the FCC regulatory jurisdiction over the following areas relating to communications satellite operations:

·	the assignment of satellite radio frequencies and orbital locations;

·	licensing of satellites, earth stations, the granting of related authorizations, and evaluation of the fitness of a company to be a licensee;

·	approval for the relocation of satellites to different orbital locations or the replacement of an existing satellite with a new satellite;

·	ensuring compliance with the terms and conditions of such assignments and authorizations, including required timetables for construction and operation of satellites and other due diligence requirements;

·	avoiding interference with other radio frequency emitters; and

·	ensuring compliance with other applicable provisions of the Communications Act and FCC rules and regulations governing the operations of satellite communications providers.

In order to obtain FCC satellite licenses and authorizations, satellite operators must satisfy strict legal, technical and financial qualification requirements. Once issued, these licenses and authorizations are subject to a number of conditions including, among other things, satisfaction of ongoing due diligence obligations, construction milestones, and various reporting requirements. Applications for new or modified satellites and earth stations are necessary for further development and expansion of satellites services. Necessary federal approval of these applications may not be granted, or may not be granted in a timely manner.

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Overview of Our Satellites Licenses and Authorizations. This overview describes our satellite licenses and authorizations.

Our satellites are located in orbital positions, or slots, that are designated by their western longitude. An orbital position describes both a physical location and an assignment of spectrum in the applicable frequency band. Each transponder on our satellites typically exploits one frequency channel. Through digital compression technology, we can currently transmit up to 13 standard-definition digital video channels from each transponder. Several of our satellites also include spot-beam technology which enables us to provide services on a local or regional basis, but reduces the number of video channels that could otherwise be offered across the entire United States.

We have U.S. DBS licenses for 30 frequencies at the 61.5 degree orbital location, capable of providing service to the Eastern and Central United States. We are also currently operating on the two unassigned frequencies at the 61.5 degree orbital location under a conditional special temporary authorization. That authority requires periodic renewal. The licensing of those two channels is under FCC review, and also subject to an FCC moratorium on new DBS applications. The FCC has previously found that existing DBS providers will not be eligible for the two unassigned channels at the 61.5 degree orbital location. EchoStar Satellite L.L.C. has a pending reconsideration petition of that decision.

We also have the right to use 32 frequencies at a Mexican DBS orbital slot at the 77 degree orbital location and hold licenses or have entered into agreements to lease capacity on satellites at the following fixed satellite services orbital locations including:

·	500 MHz of Ku spectrum divided into 32 frequencies at the 121 degree orbital location, capable of providing service to CONUS, plus 500 MHz of Ka spectrum at the 121 degree orbital location capable of providing service into select spot beams;

·	500 MHz of Ku spectrum divided into 24 frequencies at the 105 degree orbital location, currently capable of providing service to CONUS, Alaska and Hawaii, plus approximately 720 MHz of Ka spectrum capable of providing service through spot beams to CONUS, Alaska and Hawaii; and

·	500 MHz of Ku spectrum divided into 24 frequencies at the 85 degree orbital location, currently capable of providing service to CONUS, plus approximately 720 MHz of Ka spectrum capable of providing service through spot beams to CONUS.

We also hold authorizations to construct additional satellites at other orbital locations. Specifically, we hold Ka-band licenses at the 97 and 113 degree orbital locations. More recently, we were granted authority for a “tweener” DBS satellite at the 86.5 degree orbital location. That authorization will be conditioned on final FCC licensing and service rules in the “tweener” proceeding, in which the FCC is examining permitting satellites to operate from orbital locations 4.5 degrees (half of the usual 9 degrees) away from traditional DBS satellites. The FCC has also granted authorizations to Spectrum Five for a tweener satellite at the 114.5 degree orbital location. EchoStar Satellite L.L.C. has challenged the Spectrum Five authorization, and Telesat Canada, a Canadian satellite operator, has challenged our authorization.

Use of these licenses and conditional authorizations is subject to certain technical and due diligence requirements, including the requirement to construct and launch satellites according to specific milestones and deadlines. There can be no assurance that we will develop acceptable plans to meet these deadlines, or that we will be able to utilize these orbital slots.

Duration of our Satellite Licenses. Generally speaking, all of our satellite licenses are subject to expiration unless renewed by the FCC. The term of each of our DBS licenses is 10 years; fixed satellite services licenses generally are for 15 year terms. In addition, our special temporary authorizations are granted for periods of only 180 days or less, subject again to possible renewal by the FCC.

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Opposition and other Risks to our Licenses. Several third parties have opposed, and we expect them to continue to oppose, some of our FCC satellite authorizations and pending requests to the FCC for extensions, modifications, waivers and approvals of our licenses. In addition, we may not have fully complied with all of the FCC reporting and filing requirements in connection with our satellite authorizations. Consequently, it is possible the FCC could revoke, terminate, condition or decline to extend or renew certain of our authorizations or licenses.

FCC Rulemaking Affecting our Licenses and Applications. A number of our other applications have been denied or dismissed without prejudice by the FCC, or remain pending. We cannot be sure that the FCC will grant any of our satellite applications, or that the authorizations, if granted, will not be subject to onerous conditions. Moreover, the cost of building, launching and insuring a satellite can be as much as $300 million or more, and we cannot be sure that we will be able to construct and launch all of the satellites for which we have requested authorizations. The FCC has also imposed a $3 million bond requirement for our fixed satellite services satellite licenses, all or part of which would be forfeited by a licensee that does not meet its diligence milestones for a particular satellite.

Reverse Band (17/24 GHz BSS) Spectrum. The FCC has recently announced licensing and service rules for the 17/24 GHz BSS or “reverse band” spectrum, which could create substantial additional capacity for satellite providers. It could also result in additional satellite competition from new entrants. Under FCC rules, we are eligible for up to five orbital locations. Our final application filed during the first quarter 2008 included the following five orbital locations: 110.4 degree west longitude, 107 degree west longitude, 79 degree west longitude, 75 degree west longitude and 61.15 degree west longitude. We cannot predict when, or whether, the FCC will grant our applications. Other applicants’ selected orbital locations that might limit the utility of this new spectrum for our operations, i.e., splitting the available frequencies at an orbital location with another applicant. Our ability to take advantage of U.S. spectrum may also be constrained by satellite licensees from other nations that may have international priority over U.S. licensees. The FCC has also imposed a $3 million bond requirement for Reverse Band satellites, all or part of which would be forfeited by a licensee that does not meet its diligence milestones for a particular satellite.

Interference from Other Services Sharing Satellite Spectrum. The FCC has adopted rules that allow non-geostationary orbit fixed satellite services to operate on a co-primary basis in the same frequency band as DBS and Ku-band-based fixed satellite services. The FCC has also authorized the use of terrestrial communication services (“MVDDS”) in the DBS band. MVDDS licenses were auctioned in 2004. Despite regulatory provisions to protect DBS operations from harmful interference, there can be no assurance that operations by other satellite or terrestrial communication services in the DBS band will not interfere with our DBS operations and adversely affect our business.

International Satellite Competition and Interference. As noted above, we have received authority to provide service from a Mexican orbital slot at 77 degrees. The possibility that the FCC will allow service to the U.S. from additional foreign slots may permit additional competition against us from other satellite providers. For instance, DIRECTV recently obtained FCC authority to provide service to the United States from a Canadian DBS orbital slot. It may also provide a means by which to increase our available satellite capacity in the United States. In addition, a number of administrations, such as Great Britain and The Netherlands, have requested to add orbital locations serving the U.S. close to our licensed slots. Such operations could cause harmful interference into our satellites and constrain our future operations at those slots if such “tweener” operations are approved by the FCC. The risk of harmful interference will depend upon the final rules adopted in the FCC’s “tweener” proceeding.

Emergency Alert System. The Emergency Alert System (“EAS”) requires participants to interrupt programming during nationally declared emergencies and to pass through emergency-related information. The FCC requires satellite carriers to participate in the “national” portion of EAS, and is considering whether to mandate that satellite carriers also interrupt programming for local emergencies and weather events. We cannot be sure that this requirement will not affect us adversely by requiring us to devote additional resources to complying with EAS requirements.

The International Telecommunication Union. Our satellites also must conform to the International Telecommunication Union (“ITU”) requirements and regulations. We have cooperated, and continue to cooperate, with the FCC in the preparation of ITU filings and responses. “Requests for modification” that have been filed by the United States government for our satellites are pending or in various stages of completion. We cannot predict if all the required requests will be made or when the ITU will act upon them.

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Regulations Applicable to Set-top box Operations

FCC Jurisdiction over Set-top Box Operations. Our set-top boxes and similar devices must also comply with FCC technical standards and requirements. The FCC has specific Part 15 regulations for television broadcast receivers and television interface devices.

Plug and Play. Cable companies were required to separate the security functionality from their set-top boxes to increase competition and encourage the sale of set-top boxes in the retail market by July 1, 2007. Traditionally, cable service providers sold or leased set-top boxes with integrated security functionality to subscribers. DBS providers are not currently subject to the removable security requirements. The development of a retail market for cable set-top boxes could provide us with an opportunity to expand operations providing set-top box equipment to non-DBS households. The FCC has an open proceeding addressing the need to expand the scope of the cable “plug and play” rules, and the need for all-video provider set-top box solutions. If the FCC were to extend or expand its separate security rules to include DBS providers, sales of our set-top boxes to DBS providers may be negatively impacted. Specifically, if a retail DBS set-top box market develops capable of accepting the security modules, we risk reduced sales if competitors produce DBS set-top boxes.

NTIA Digital Converter Box Program. The Commerce Department’s National Telecommunications and Information Administration (“NTIA”) has established a coupon program allowing U.S. households to request up to two coupons, worth $40 each, to be used toward the purchase of up to two, digital-to-analog converter boxes as part of the February 2009 digital television transition. This program is necessary to ensure that consumers with analog televisions will continue to be able to view over-the-air broadcast signals after the digital transition. Our converter box (“TR-40”) was approved by NTIA on December 19, 2007. We intend to actively market and sell our TR-40 box to households that are likely to purchase digital-to-analog converter boxes through the NTIA coupon program.

Export Control Regulation

We are required to obtain import and export licenses from the United States government to receive and deliver components of direct-to-home satellite television systems. In addition, the delivery of satellites and the supply of related ground control equipment, technical data, and satellite communication/control services to destinations outside the United States is subject to strict export control and prior approval requirements from the United States government (including prohibitions on the sharing of certain satellite-related goods and services with China).

PATENTS AND TRADEMARKS

Many entities, including some of our competitors, have or may in the future obtain patents and other intellectual property rights that cover or affect products or services related to those that we will offer. In general, if a court determines that one or more of our products infringes on intellectual property held by others, we may be required to cease developing or marketing those products, obtain licenses from the holders of the intellectual property at a material cost, or redesign those products in such a way as to avoid infringing the patent claims. If those intellectual property rights are held by a competitor, we may be unable to obtain the intellectual property at any price, which could adversely affect our competitive position.

We may not be aware of all intellectual property rights that our products may potentially infringe. In addition, patent applications in the United States are confidential until the Patent and Trademark Office issues a patent and, accordingly, our products may infringe claims contained in pending patent applications of which we are not aware. Further, the process of determining definitively whether a claim of infringement is valid often involves expensive and protracted litigation, even if we are ultimately successful on the merits.

We cannot estimate the extent to which we may be required in the future to obtain intellectual property licenses or the availability and cost of any such licenses. Those costs, and their impact on our results of operations, could be material. Damages in patent infringement cases may also include treble damages in certain circumstances. To the extent that we are required to pay unanticipated royalties to third parties, these increased costs of doing business could negatively affect our liquidity and operating results. We are currently defending multiple patent infringement actions. We cannot be certain the courts will conclude these companies do not own the rights they claim, that our products do not infringe on these rights, that we would be able to obtain licenses from these persons on commercially reasonable terms or, if we were unable to obtain such licenses, that we would be able to redesign our products to avoid infringement. See “Legal Proceedings.”

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ENVIRONMENTAL REGULATIONS

We are subject to the requirements of federal, state, local and foreign environmental and occupational safety and health laws and regulations. These include laws regulating air emissions, water discharge and waste management. We attempt to maintain compliance with all such requirements. We do not expect capital or other expenditures for environmental compliance to be material in 2007 or 2008. Environmental requirements are complex, change frequently and have become more stringent over time. Accordingly, we cannot provide assurance that these requirements will not change or become more stringent in the future in a manner that could have a material adverse effect on our business.

GEOGRAPHIC AREA DATA AND TRANSACTIONS WITH MAJOR CUSTOMERS

For principal geographic area data and transactions with major customers for 2007, 2006 and 2005, see Note 8 in the Notes to the Combined Financial Statements in Item 15 of this Annual Report on Form 10-K.

EMPLOYEES

We have approximately 1,500 employees. In addition, DISH Network provides us with certain management and administrative services, which will include the services of certain employees of DISH Network. See “Certain Intercompany Agreements — Management Services Agreement” set forth in our Proxy Statement for the 2008 Annual Meeting of Shareholders under the caption “Certain Relationships and Related Transactions.”

WHERE YOU CAN FIND MORE INFORMATION

We are subject to the informational requirements of the Exchange Act and accordingly file an annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other information with the Securities and Exchange Commission (“SEC”). The Public may read and copy any materials filed with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Please call the SEC at (800) SEC-0330 for further information on the Public Reference Room. As an electronic filer, our public filings are also maintained on the SEC’s Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that website is http://www.sec.gov.

WEBSITE ACCESS

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act also may be accessed free of charge through our website as soon as reasonably practicable after we have electronically filed such material with, or furnished it to, the SEC. The address of that website is http://www.echostar.com.

We have adopted a written code of ethics that applies to all of our directors, officers and employees, including our principal executive officer and senior financial officers, in accordance with the Sarbanes-Oxley Act of 2002 and the rules of the Securities and Exchange Commission promulgated thereunder. Our code of ethics is available on our corporate website at www.echostar.com. In the event that we make changes in, or provide waivers of, the provisions of this code of ethics that the SEC requires us to disclose, we intend to disclose these events on our website.

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EXECUTIVE OFFICERS OF THE REGISTRANT

(furnished in accordance with Item 401 (b) of Regulation S-K, pursuant to General Instruction G(3) of Form 10-K)

The following table sets forth the name, age and offices with EchoStar Corporation (“EchoStar”) of each of our executive officers, the period during which each executive officer has served as such, and each executive officer’s business experience during the past five years:

Name	Age	Position

Charles W. Ergen	54	Chairman, Chief Executive Officer and Director
R. Stanton Dodge	40	Executive Vice President, General Counsel and Secretary
Bernard L. Han	43	Executive Vice President and Chief Financial Officer
Mark W. Jackson	47	President, EchoStar Corporation
Dean A. Olmstead	52	President, Satellite Services
Steven B. Schaver	53	President, EchoStar International Corporation

Charles W. Ergen. Mr. Ergen has been Chairman of the Board of Directors and Chief Executive Officer of DISH Network since its formation and, during the past five years, has held various executive officer and director positions with DISH Network’s subsidiaries. Mr. Ergen has also been the Chairman of the Board of Directors and Chief Executive Officer of EchoStar since October 2007. Mr. Ergen, along with his spouse and James DeFranco, was a co-founder of DISH Network in 1980.

R. Stanton Dodge. Mr. Dodge is currently the Executive Vice President, General Counsel and Secretary of DISH Network and EchoStar and is responsible for all legal affairs of DISH Network, EchoStar and their subsidiaries. Mr. Dodge serves as our Executive Vice President, General Counsel and Secretary pursuant to a management services agreement between DISH Network and EchoStar that was entered into in connection with the Spin-off of EchoStar from DISH Network. Since joining DISH Network in November 1996, he has held various positions in DISH Network’s legal department. Prior to joining DISH Network, Mr. Dodge was a law clerk to the Hon. Jose D.L. Marquez of the Colorado Court of Appeals. He received his J.D., magna cum laude, from Suffolk University Law School in 1995 and his B.S. in accounting from the University of Vermont in 1991.

Bernard L. Han. Mr. Han was named Executive Vice President and Chief Financial Officer of DISH Network in September 2006 and is currently responsible for all accounting, finance and information technology functions of DISH Network and EchoStar. Mr. Han serves as our Executive Vice President and Chief Financial Officer pursuant to a management services agreement between DISH Network and EchoStar that was entered into in connection with the Spin-off of EchoStar from DISH Network. From October 2002 to May 2005, Mr. Han served as Executive Vice President and Chief Financial Officer of Northwest Airlines, Inc. Prior to October 2002, he held positions as Executive Vice President and Chief Financial Officer and Senior Vice President and Chief Marketing Officer at America West Airlines, Inc.

Mark W. Jackson. Mr. Jackson is currently the President of EchoStar and oversees all day to day operations of EchoStar. Mr. Jackson served as the President of EchoStar Technologies Corporation from June 2004 through December 2007 and Senior Vice President from April 2000 until June 2004.

Dean A. Olmstead. Mr. Olmstead joined EchoStar as President of Satellite Services in January 2008 and is responsible for all aspects of our satellite services business. From May 2006 until January 2008, Mr. Olmstead served as an advisor to Loral Space & Communications (“Loral”) on strategic and growth opportunities for Loral’s satellite service businesses, which completed a merger with Telesat in October 2007, and he served on Loral’s Board of Directors. From March 2005 to September 2006, he was President of Arrowhead Global Solutions, which was acquired by CapRock Communications in May 2007. From November 2001 to September 2004, Mr. Olmstead was President and CEO of SES Americom and a member of the SES Global Executive Committee, where he led SES’ expansion from Europe to become one of the top global providers of satellite communications.

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Steven B. Schaver. Mr. Schaver was named President of EchoStar International Corporation in April 2000. Mr. Schaver served as DISH Network’s Chief Financial Officer from February 1996 through August 2000 and served as DISH Network’s Chief Operating Officer from November 1996 until April 2000.

There are no arrangements or understandings between any executive officer and any other person pursuant to which any executive officer was selected as such. Pursuant to the Bylaws of EchoStar, executive officers serve at the discretion of the Board of Directors.

THE ECHOSTAR SPIN-OFF

On January 1, 2008, DISH Network completed the Spin-off of our technology and certain infrastructure assets. DISH Network and EchoStar now operate as separate publicly-traded companies, and neither entity has any ownership interest in the other.

Unaudited Pro Forma Combined and Adjusted Financial Information

Our audited historical combined financial statements reflect the historical financial position and results of operations of entities included in the consolidated financial statements of DISH Network, principally representing only the digital set-top box business, using the historical results of operations and historical bases of assets and liabilities of this business. Our historical combined financial statements reflect sales to DISH Network at cost and do not include certain satellites, uplink and satellite transmission assets, real estate and other assets and related liabilities that were contributed to us by DISH Network in the Spin-off. These assets and liabilities, which primarily comprise our fixed satellite services business, have been separately audited and are included in the Statement of Net Assets to be Contributed by DISH Network and the Unaudited Pro Forma Combined and Adjusted Financial Information included herein. DISH Network acquired Sling Media on October 19, 2007 and contributed to us in the Spin-off. Our historical financial data includes financial information for Sling Media from the acquisition date through December 31, 2007. We have prepared unaudited pro forma combined financial statements, which include Sling Media’s financial information from January 1, 2007 to the acquisition date, to make adjustments for and give effect to the Spin-off.

The Unaudited Pro Forma Combined and Adjusted Financial Information give effect to:

the contribution by DISH Network to us of the net assets to primarily be used in our fixed satellite services business;

the contribution by DISH Network to us of $1.0 billion in cash;

the results of operations and other expenses, including depreciation expenses, related to the assets contributed to us by DISH Network comprising our fixed satellite services business;

the impact of the transition services and commercial agreements between us and DISH Network; and

the distribution of approximately 89.7 million shares of our common stock to holders of DISH Network stock.

The share numbers are based on DISH Network share numbers as of December 31, 2007, and the settlement amount is based on our balances as of December 31, 2007.

The unaudited pro forma combined financial statements presented below have been derived in part from our audited combined financial statements for the year ended December 31, 2007. These unaudited pro forma combined financial statements should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our combined financial statements and the notes to those statements included elsewhere in this Annual Report on Form 10-K.

The unaudited pro forma combined statement of operations for the year ended December 31, 2007 have been prepared as if the transactions described above occurred as of January 1, 2007. The unaudited pro forma combined balance sheet as of December 31, 2007 has been prepared as if these transactions occurred as of December 31, 2007. The pro forma adjustments are based upon available information and assumptions that management believes are reasonable based on our current plans and expectations. Our historical financial, pro forma and other data included in this report are not necessarily indicative of our future financial position, future results of operations or future cash flows, nor do they reflect what our financial position, results of operations or cash flows would have been as a stand-alone company during the periods presented.

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Our unaudited pro forma combined statement of operations does not give effect to initial expenses directly attributable to the Spin-off because of their non-recurring nature. A significant portion of these non-recurring charges to effect the separation were incurred by DISH Network, such as outside legal and accounting fees relating to the Spin-off, office move costs, costs to separate information systems and temporary consulting costs. We will incur separation costs that have a future benefit to our company such as employee compensation expenses and temporary labor used to develop ongoing processes. See “Certain Intercompany Agreements” set forth in our Proxy Statement for the 2008 Annual Meeting of Shareholders under the caption “Certain Relationships and Related Transactions.”

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ECHOSTAR CORPORATION

UNAUDITED PRO FORMA COMBINED AND ADJUSTED STATEMENTS OF OPERATIONS

For the Year Ended December 31, 2007

(In thousands, except per share data)

				Pro Forma										Pro Forma				Pro Forma
	EchoStar			Spin				EchoStar			Sling Media			Acquisition				Combined and
	Historical (1)			Adjustments				Pro Forma			Historical (2)			Adjustments				Adjusted
	(In thousands)
Revenue:
Equipment and other sales - DISH Network	$	1,294,215		$	169,931		(a)	$	1,464,146		$	-		$	-			$	1,464,146
Equipment sales		249,850			-				249,850			23,220			-				273,070
FSS - DISH Network		-			316,881		(b)		316,881			-			-				316,881
FSS - other		-			20,567		(c)		20,567			-			-				20,567
Other - DISH Network		-			13,592		(d)		13,592			-			-				13,592
Total revenue		1,544,065			520,971				2,065,036			23,220			-				2,088,256

Costs and Expenses:
Cost of equipment and other sales		1,451,704			4,080		(e)		1,455,784			16,201			-				1,471,985

FSS cost of sales (exclusive of depreciation and amortization (f))		-			155,859		(f)		155,859			-			-				155,859
Marketing and sales		6,731			-				6,731			21,210							27,941
Research and development		78,790			-				78,790			13,095			2,492		(m)		94,377
General and administrative		83,514			13,047		(g)		96,561			5,307			749		(m)		102,617
Depreciation and amortization		9,705			225,885		(h)		235,590			10			10,930		(n)		246,530
Total costs and expenses		1,630,444			398,871				2,029,315			55,823			14,171				2,099,309

Operating income (loss)		(86,379	)		122,100				35,721			(32,603	)		(14,171	)			(11,053	)

Other Income (Expense):
Interest income		10,459			54,605		(i)		65,064			395			-				65,459
Interest expense, net of amounts capitalized		(796	)		(33,907	)	(j)		(34,703	)		(10	)		-				(34,713	)
Other		(6,479	)		(127	)			(6,606	)		(516	)		-				(7,122	)
Total other income (expense)		3,184			20,571				23,755			(131	)		-				23,624

Income (loss) before income taxes		(83,195	)		142,671				59,476			(32,734	)		(14,171	)			12,571
Income tax (provision) benefit, net		(2,105	)		48,983		(k)		46,878			(103	)		33,820		(o)		80,595
Net income (loss)	$	(85,300	)	$	191,654			$	106,354		$	(32,837	)	$	19,649			$	93,166

Pro forma earnings (loss) per share:
Basic (l)																		$	1.04
Diluted (l)																		$	1.03
Pro forma shares outstanding:
Basic (l)																			89,712
Diluted (l)																			90,167

(1)	Includes Sling Media financial data from the acquisition date (October 19, 2007) through December 31, 2007

(2)	Includes Sling Media financial data from January 1, 2007 through the acquisition date, October 19, 2007.

See accompanying notes.

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ECHOSTAR CORPORATION

UNAUDITED PRO FORMA COMBINED AND ADJUSTED BALANCE SHEET

As of December 31, 2007

(In thousands, except per share data)

											EchoStar
			Net Assets		EchoStar		Pro Forma				Pro Forma
	EchoStar		to be		Historical		Spin				Combined and
	Historical		Contributed		Combined		Adjustments				Adjusted
	(In thousands, except for per share amounts)
	ASSETS
Current Assets:
Cash and cash equivalents	$	41,082	$	1,000,000	$	1,041,082	$	-			$	1,041,082
Marketable investment securities		491,185		-		491,185		-				491,185
Trade accounts receivable net of allowance for doubtful accounts		34,154		3,900		38,054		-				38,054
Inventories, net		21,043		9,957		31,000		-				31,000
Current deferred tax assets		-		5,731		5,731		1,813		(p)		7,544
Other current assets		23,290		7,951		31,241		-				31,241
Total current assets		610,754		1,027,539		1,638,293		1,813				1,640,106
Restricted cash and marketable investment securities		-		3,150		3,150		-				3,150
Property and equipment, net		213,837		1,302,767		1,516,604		-				1,516,604
FCC authorizations		42,873		123,121		165,994		-				165,994
Intangible assets, net		71,646		142,898		214,544		-				214,544
Goodwill (Note 2)		248,428		-		248,428						248,428
Investments in affiliates		59,160		-		59,160		-				59,160
Other noncurrent assets, net		14,212		20,335		34,547		-				34,547
Total assets	$	1,260,910	$	2,619,810	$	3,880,720	$	1,813			$	3,882,533

	LIABILITIES AND OWNER'S EQUITY (DEFICIT)
Current Liabilities:
Trade accounts payable	$	22,786	$	-	$	22,786	$	(16,961	)	(r)	$	5,825
Deferred revenue		4,055		-		4,055						4,055
Accrued expenses		22,191		15,800		37,991		(1,585	)	(r)		36,406
Current portion of long-term debt		1,365		39,168		40,533		-				40,533
Total current liabilities		50,397		54,968		105,365		(18,546	)			86,819

Long-term obligations, net of current portion:
Long-term debt		2,344		339,542		341,886		-				341,886
Deferred tax liabilities		651		239,971		240,622		(62,650	)	(p)		177,972
Other long-term liabilities		-		-		-		-				-
Total long-term obligations, net of current portion		2,995		579,513		582,508		(62,650	)			519,858

Total liabilities		53,392		634,481		687,873		(81,196	)			606,677

Net investment in EchoStar (Owner's Equity (Deficit)):

Preferred Stock of EchoStar, $.001 par value, 20,000,000 shares authorized		-		-		-		-				-
EchoStar Class A common stock, $.001 par value, 1,600,000,000 shares authorized		-		-		-		42		(q)		42
EchoStar Class B common stock, $.001 par value, 800,000,000 shares authorized		-		-		-		48		(q)		48
Accumulated other comprehensive income (loss)		66,696		-		66,696		-				66,696
Owner's net investment		1,140,822		-		1,140,822		2,068,248		(r)		3,209,070
Net assets to be contributed		-		1,985,329		1,985,329		(1,985,329	)	(r)		-

Total net investment in EchoStar (Owner's equity (deficit))		1,207,518		1,985,329		3,192,847		83,009				3,275,856

Total liabilities and net investment in EchoStar (Owner's equity (deficit))	$	1,260,910	$	2,619,810	$	3,880,720	$	1,813			$	3,882,533

See accompanying notes.

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ECHOSTAR CORPORATION

UNAUDITED NOTES TO PRO FORMA COMBINED FINANCIAL DATA

Adjustments to Pro Forma Combined Statements of Operations:

The pro forma adjustments for the Spin-off represent the estimated incremental revenue and expenses of EchoStar associated with operating as a stand-alone company, primarily consisting of the results of operations and other expenses, including depreciation expenses, associated with the net assets contributed to us by DISH Network to primarily be used in our fixed satellite services business and our commercial agreements with DISH Network (see “Certain Intercompany Agreements” set forth in our Proxy Statement for the 2008 Annual Meeting of Shareholders under the caption “Certain Relationships and Related Transactions”).

(a)

Represents incremental revenue on equipment sales to DISH Network at cost plus an additional amount that is equal to an agreed percentage of our cost, which will vary depending on the nature of the equipment provided. The additional amount was determined for purposes of the pro forma income statement based on specific margins over cost for different categories of equipment as to which we and DISH Network have reached an understanding. We calculated pro forma revenues by applying these margins to the mix of equipment supplied to DISH Network for the year ended December 31, 2007, thus determining a weighted average margin over cost for these sales of approximately 13.1% for the year ended December 31, 2007. Applying these weighted average margins over cost to the historical cost of equipment and other sales to DISH Network for the year ended December 31, 2007, we calculated pro forma adjustments to revenue of $170 million for the year ended December 31, 2007.

Our margin over cost for sales to DISH Network on a pro forma basis depended to a significant extent on the nature of equipment supplied to DISH Network and therefore may be subject to change based on changes in the mix of our equipment sales to DISH Network, although we do not expect any such change to be material. Future margins will depend on this product mix as well as other factors that may lead to future changes in product margins from those as to which we and DISH Network reached an initial understanding, including performance capabilities and technical specifications of the equipment we supply to DISH Network, which may affect the weighted average margin over cost. Had the margin over cost on equipment supplied to DISH Network on a pro forma basis been 1% higher or lower than was originally determined, our pro forma revenues and pro forma operating income would have increased or decreased, respectively, by $12.9 million for the year ended December 31, 2007.

(b)	Represents revenue for sales of services to DISH Network related to the satellites, uplink and satellite transmission assets to be contributed to us by DISH Network, including uplink, telemetry, tracking and control, and professional engineering services.

(c)	Represents revenue for sales of services to third-parties related to the satellites, uplink and satellite transmission assets to be contributed to us by DISH Network.

(d)	Primarily represents rental revenue related to buildings contributed to us by DISH Network, and leased back to DISH Network.

(e)	Represents incremental cost of sales related to the purchase of remanufactured receivers from DISH Network, which are resold to third parties, pursuant to our receiver agreement with DISH Network.

(f)

Represents cost of sales related to services sold to DISH Network and other third-parties related to the satellites, uplink and satellite transmission assets to be contributed to us by DISH Network, including satellite leasing, uplink, telemetry, tracking and control services. These amounts are exclusive of depreciation and amortization expense.

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ECHOSTAR CORPORATION

UNAUDITED NOTES TO PRO FORMA COMBINED FINANCIAL DATA - Continued

Depreciation and amortization expense consists of the following:

	For the Year Ended
	December 31,
	2007
	(In thousands)
Satellites		139,132
Furniture, fixtures, equipment and other		64,233
Identifiable intangible assets subject to amortization		17,905
Buildings and improvements		4,615
Total depreciation and amortization	$	225,885

(g)	Represents additional general and administrative expenses primarily related to corporate overhead expenses and related employee benefits charged to us by DISH Network.

(h)	Represents additional depreciation and amortization expense primarily associated with the satellites, uplink and satellite transmission assets and certain other real estate assets contributed to us by DISH Network.

(i)

Represents interest income primarily related to the $1.0 billion of cash contributed to us by DISH Network. The amount of interest income was calculated assuming that $1.0 billion was contributed on January 1, 2007 and was invested in marketable instruments similar to those held by DISH Network in its marketable investment securities portfolio, using DISH Network’s weighted-average interest rate earned on that portfolio of approximately 5.3% for the year ended December 31, 2007. We intend to use this cash for, among other things, satellite construction, strategic investments and other initiatives. We expect that following the Spin-off, our working capital requirements will be funded primarily by cash flow generated from operations. We may also use a portion of these funds to repurchase shares of our Class A common stock.

(j)	Represents additional interest expense primarily associated with the satellite capital leases for AMC-15 and AMC-16 contributed to us by DISH network.

(k)

Represents the tax effect of pro forma adjustments using our blended Federal, state and international statutory tax rate adjusted for permanent differences and the release of our valuation allowance of $72 million in 2007. The release of the valuation allowance is based on our commercial agreements with DISH Network, which, together with existing third-party contracts, is expected to result in EchoStar having taxable income for the foreseeable future. As a result, we expect to use all of our federal net operating losses before they expire. Additionally, we expect sufficient capital gains to offset any realized capital losses within the statutory period related to the impairments included in the deferred tax assets.

(l)

The calculation of pro forma basic earnings per share and shares outstanding is based on the number of shares of DISH Network common stock outstanding as of December 31, 2007 adjusted for the distribution ratio of one share of EchoStar common stock for every five shares of DISH Network common stock. The calculation of pro forma diluted earnings per share and shares outstanding for the period presented is based on the number of shares of DISH Network common stock outstanding as of December 31, 2007 and diluted shares of common stock outstanding as of December 31, 2007 adjusted for the same distribution ratio. This calculation may not be indicative of the dilutive effect that will actually result from the replacement of DISH Network stock-based awards held by our employees and employees of DISH Network or the grant of new stock based awards.

(m)	Represents amortization, based on vesting requirements, of prepaid compensation expense related to the acquisition of Sling Media.

(n)	Represents additional amortization expense related to the purchase price allocation for the acquisition of Sling Media. See the purchase price allocation in Note 2 in the Notes to Combined Financial Statements in Item 15 of this Annual Report on Form 10-K.

The pro forma adjustments for the acquisition of Sling Media are as follows:

(o)

Primarily represents the reversal of Sling Media’s deferred tax asset valuation allowance and the change in deferred taxes for the pro forma adjustment. The release of the valuation allowance based on our commercial agreements with DISH Network, which, together with existing third-party contracts, are expected to result in EchoStar having taxable income for the foreseeable future. As a result, we expect to use all of our federal net operating losses before they expire, including those attributable to Sling Media.

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ECHOSTAR CORPORATION

UNAUDITED NOTES TO PRO FORMA COMBINED FINANCIAL DATA - Continued

Adjustments to Pro Forma Combined Balance Sheet:

Further information regarding the Net Assets to be Contributed can be found in the audited Statement of Net Assets included in this Annual Report on Form 10-K. The pro forma balance sheet adjustments for the Spin-off represent the following:

(p)

Represents the tax effect of pro forma adjustments using our pro forma blended Federal and state statutory tax rate, the reduction of net operating losses and credits not transferred to EchoStar as part of the transaction and the release of our valuation allowance. The release of the valuation allowance based on our commercial agreements with DISH Network, which, together with existing third-party contracts, are expected to result in EchoStar having taxable income for the foreseeable future. As a result, we expect to use all of our federal net operating losses before they expire. Additionally, we expect sufficient capital gains to offset any realized capital losses within the statutory period as related to the impairments included in the deferred tax assets.

(q)	Represents the distribution of approximately 89.7 million shares of our common stock to holders of DISH Network common stock.

(r)	Represents the elimination of DISH Network’s net investment in us and the contribution of $1.0 billion of cash and other net assets by DISH Network to us.

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Item 1A. RISK FACTORS

The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties that we are unaware of or that we currently believe to be immaterial also may become important factors that affect us. If any of the following events occur, our business, financial condition or results of operation could be materially and adversely affected.

General Risks Affecting Our Business

We currently depend on DISH Network and Bell ExpressVu for substantially all of our revenue and DISH Network accounted for over 80% of our revenue in the years ended December 31, 2007, 2006 and 2005; the loss of, or a significant reduction in orders from, either of DISH Network or Bell ExpressVu would significantly reduce our revenue and adversely impact our operating results.

DISH Network accounted for approximately 83.8%, 84.5% and 85.6% of our revenue in the years ended December 31, 2007, 2006 and 2005, respectively. In addition, Bell ExpressVu accounted for approximately 10.7%, 12.2% and 11.4% of our revenue in the years ended December 31, 2007, 2006 and 2005, respectively. Any reduction in sales to DISH Network or Bell ExpressVu or in the prices they pay for the products and services they purchase from us would have a significant negative impact on our business. Moreover, because our sales to these customers are made pursuant to standard purchase orders, these customers have no future obligation to purchase set-top boxes from us and existing orders may be cancelled or reduced on short notice. Cancellations or reductions of customer orders could result in the loss of anticipated sales without allowing us sufficient time to reduce our inventory and operating expenses. In addition, the timing of orders from these two customers could vary significantly depending on equipment promotions these customers offer to their subscribers, changes in technology, and their use of remanufactured set-top boxes, which may cause our revenue to vary significantly quarter over quarter and could expose us to the risks of inventory shortages or excess inventory. These inventory risks are particularly acute during end product transitions in which a new generation of set-top boxes is being deployed and inventory of older generation set-top boxes is at a higher risk of obsolescence. This in turn could cause our operating results to fluctuate significantly. Furthermore, because of the competitive nature of the set-top box business and the short-term nature of our purchase orders with these two customers, we could in the future be required to reduce the average selling-prices of our set-top boxes to these two customers, which in turn would adversely affect our gross margins and profitability.

In addition, because substantially all of our revenue is tied to DISH Network and Bell ExpressVu, our success also depends to a significant degree on the continued success of DISH Network and Bell ExpressVu in attracting new subscribers or in marketing programming packages to subscribers that will require the purchase of new set-top boxes.

There is a relatively small number of potential new customers for our set-top boxes and fixed satellite services, and we expect this customer concentration to continue for the foreseeable future. Therefore, our operating results will likely continue to depend on sales to a relatively small number of customers, as well as the continued success of these customers. In addition, we may from time to time enter into customer agreements providing for exclusivity periods during which we may sell a specified product only to that customer. If we do not develop relationships with new customers, we may not be able to expand our customer base or maintain or increase our revenue.

We currently have substantial unused satellite capacity; our results of operations could be materially adversely affected if we are not able to utilize all of this capacity.

While we are currently evaluating various opportunities to make profitable use of our satellite capacity (including, but not limited to, supplying satellite capacity for new international ventures), we do not have firm plans to utilize all of our satellite capacity. In addition, there can be no assurance that we can successfully develop the business opportunities we currently plan to pursue with this capacity. Future costs associated with our excess satellite capacity will negatively impact our margins if we do not generate revenue to offset the costs of this capacity.

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In addition, we currently have leased minimal capacity on our two leased satellites, AMC-15 and AMC-16, and have substantial unleased capacity on one of our owned satellites, EchoStar IX. Each of our satellites, must be reviewed for possible impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. In the event that we are unsuccessful in marketing capacity on these satellite assets and do not achieve sufficient utilization and prices, in addition to reporting lower than expected revenues and profitability, we could be required to record a substantial impairment charge relating to one or more of these satellites. We currently estimate that these potential charges could aggregate up to $250 million, which, if incurred would have a material adverse effect on our reported operating results and financial position. We performed a preliminary assessment of the recoverability of the satellites to be contributed by DISH Network as if the Spin-off had been consummated and concluded that the recoverability of the satellites were not impaired as of the distribution date.

Our financial information included in this report is not necessarily indicative of our future financial position, future results of operations or future cash flows nor do they reflect what our financial position, results of operations or cash flows would have been as a stand-alone company during the periods presented.

The combined financial information included in this report does not reflect the financial condition, results of operations or cash flows we would have achieved as an independent publicly-traded company during the periods presented or those results we will achieve in the future. This is primarily a result of the following factors:

We have never been profitable as the majority of our operations have historically been in support of DISH Network and we provided our products and services to DISH Network at cost. We cannot assure you that we can achieve or sustain profitability, or that we can grow our business profitably or at all.

The financial condition and results of operations of our fixed satellite services business are reflected only in our pro forma combined financial information included herein, and not in our historical combined financial information included herein, because our fixed satellite services business was operated as an integral part of DISH Network’s subscription television business and did not constitute a “business” in the historical financial statements of DISH Network.

·	Our plans with respect to the fixed satellite services business are being developed and we have not historically obtained significant revenues with respect to our fixed satellite services business.

·	Sling Media is a recent acquisition and we have not operated that business for a significant period of time.

·	Our combined financial results reflect allocations of corporate expenses from DISH Network. Those allocations may be different from the comparable expenses we would have incurred had we operated as an independent publicly-traded company.

Our working capital requirements and capital required for our general corporate purposes historically have been satisfied as part of the corporate-wide cash management policies of DISH Network. As a result of the Spin-off, DISH Network will no longer provide us with funds to finance our working capital or other cash requirements. Without the opportunity to obtain financing from DISH Network, we may in the future need to obtain additional financing from banks, or through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements. Such financing may not be available to us on acceptable terms, or at all. We may have a credit rating that is lower than DISH Network’s credit rating and may incur debt on terms and at interest rates that will not be as favorable as those historically enjoyed by DISH Network.

·	Significant changes may occur in our cost structure, management, financing and business operations as a result of our operating as an independent public company.

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The acquisition of DISH Network by a third party could have a material adverse effect on our business and financial position.

Our sales to DISH Network accounted for approximately 83.8%, 84.5% and 85.6% of our revenue in the years ended December 31, 2007, 2006 and 2005, respectively. Because our future sales to DISH Network will primarily be made pursuant to short-term contracts, DISH Network will have no material obligation to continue to purchase our principal products and services. Therefore, if DISH Network enters into a business combination transaction, or Mr. Ergen no longer controls a majority of the voting power of DISH Network or of us, our relationship with DISH Network could be terminated or substantially curtailed with little or no advance notice. Any material reduction in our sales to DISH Network would have a significant adverse effect on our business, results of operations and financial position.

Furthermore, because there are a relatively small number of potential customers for our products and services, if we lose DISH Network as a customer, it will be difficult for us to obtain alternative customer relationships that would replace our historical revenues from DISH Network.

We may not be able to obtain additional capital on acceptable terms or at all in order to grow and to increase earnings.

Our ability to increase earnings will depend in part on our ability to grow our business. While we expect our need for funds to meet our growth plans to be satisfied from our existing cash and marketable investment securities and cash we generate from operations and future financings, we cannot assure you that we will generate sufficient cash from operations or that additional financing will be available on acceptable terms, or at all, if needed in the future.

In particular, current dislocations in the credit markets, which have significantly impacted the availability and pricing of financing, particularly in the high yield debt and leveraged credit markets, may significantly constrain our ability to obtain financing to support our growth initiatives. These developments in the credit markets may have a significant effect on our cost of financing and our liquidity position and may, as a result, cause us to defer or abandon profitable business strategies that we would otherwise pursue if financing were available on acceptable terms.

In addition, we currently have contracts to construct, and conditional licenses and pending FCC applications for, a number of Ku-band, Ka-band and extended Ku-band satellites. We may need to raise additional capital to construct, launch, and insure these satellites. Depending on market conditions and our results of operations and financial condition we may not be able to raise such additional capital on acceptable terms or at all. We also periodically evaluate various strategic initiatives, the pursuit of which also could require us to raise significant additional capital. We may also use a significant portion of our existing cash to fund a potential stock buyback program of up to $1.0 billion of our Class A common stock.

We also have substantial satellite-related payment obligations under our various satellite service agreements.

We could be exposed to significant financial losses if our investments are unsuccessful.

We have entered into certain strategic transactions and investments in the United States, Asia and elsewhere, and we expect to increase our strategic investment activity. These investments, which we expect could become substantial, involve a high degree of risk and could diminish our ability to fund our stock buyback program. These investments could also expose us to significant financial losses, and may restrict our ability to make other investments or limit alternative uses of our capital resources, particularly if the underlying ventures are not successful. In particular, the laws, regulations and practices of certain countries may make it harder for our investments to be successful.

In addition, the companies in which we invest or with whom we partner may not be able to compete effectively or there may be insufficient demand for the services and products offered by these companies.

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We may pursue new acquisitions, joint ventures and other transactions to complement or expand our business which may not be successful.

We may not be able to complete such transactions and such transactions, if executed, pose significant risks and could have a negative effect on our operations. Our future success may depend on opportunities to buy other businesses or technologies that could complement, enhance or expand our current business or products or that might otherwise offer us growth opportunities. Any transactions that we are able to identify and complete may involve a number of risks, including:

·	the diversion of our management’s attention from our existing business to integrate the operations and personnel of the acquired or combined business or joint venture;

·	possible adverse effects on our operating results during the integration process; and

·	our possible inability to achieve the intended objectives of the transaction.

In addition, we may not be able to successfully or profitably integrate, operate, maintain and manage our newly acquired operations or employees. We may not be able to maintain uniform standards, controls, procedures and policies, and this may lead to operational inefficiencies.

Our business relies on intellectual property, some of which is owned by third parties, and we may inadvertently infringe their patents and proprietary rights.

Many entities, including some of our competitors, have or may in the future obtain patents and other intellectual property rights that cover or affect products or services related to those that we offer. In general, if a court determines that one or more of our products infringes on intellectual property held by others, we may be required to cease developing or marketing those products, obtain licenses from the holders of intellectual property, or redesign those products in such a way as to avoid infringing the patent claims, each of which may require material expenditures by us. If those intellectual property rights are held by a competitor, we may be unable to obtain the intellectual property at any price, which could adversely affect our competitive position.

If we fail to protect our intellectual property rights, it could harm our business and competitive position.

Our business relies on intellectual property rights to stay competitive in the market place. We rely on a combination of patent, trademark and copyright laws, trade secrets, confidentiality procedures and contractual provisions to protect our intellectual property rights and the obligations we have to third parties from whom we license intellectual property rights. Nevertheless, these afford only limited protection and policing unauthorized use of proprietary technology can be difficult and expensive. We may not be able to take appropriate steps to enforce our intellectual property rights and this could have a material adverse effect on our business, operating results and financial condition.

We are a newly independent company and our accounting and other management systems and resources may not be adequately prepared to meet the financial reporting and other requirements to which we are subject. If we are unable to achieve and maintain effective internal controls, our business, financial position and results of operations could be adversely affected.

Our financial results previously were included within the consolidated results of DISH Network, and our reporting and control systems were appropriate for those of subsidiaries of a public company. However, we were not directly subject to reporting and other requirements of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. As a result of our Spin-off from DISH Network, we are now directly subject to these requirements, including the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent registered public accounting firm addressing these controls. These reporting and other obligations will place significant demands on our management and administrative and operational resources, including accounting resources. To comply with these requirements, we anticipate that we will need to upgrade our systems, including information technology, implement additional financial and management controls, reporting systems and procedures and hire additional accounting and finance staff. If we are unable to upgrade our financial and management controls, reporting systems, information technology and procedures in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies could be impaired.

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We have not been an independent company for a significant amount of time and we may be unable to make, on a timely or cost-effective basis, the changes necessary to operate as an independent company.

Prior to our Spin-off from DISH Network, our business was operated by DISH Network as part of its broader corporate organization, rather than as an independent company. DISH Network’s senior management oversaw the strategic direction of our businesses and DISH Network performed various corporate functions for us, including, but not limited to:

·	selected human resources related functions;

·	accounting;

·	tax administration;

·	selected legal functions, as well as external reporting;

·	treasury administration, investor relations, internal audit and insurance functions; and

·	selected information technology and telecommunications services.

Because we are now an independent company, neither DISH Network nor any of its affiliates have any obligation to provide these functions to us other than those services that will be provided for a limited period of time by DISH Network pursuant to the services agreement between us and DISH Network. See “Certain Intercompany Arrangements — Services Agreement” set forth in our Proxy Statement for the 2008 Annual Meeting of Shareholders under the caption “Certain Relationships and Related Transactions.” If, once this services agreement terminates, we do not have in place our own systems and business functions, we do not have agreements with other providers of these services or we are not able to make these changes cost effectively, we may not be able to operate our business effectively and our profitability may decline. If DISH Network does not continue to perform effectively the services that are called for under the services agreement, we may not be able to operate our business effectively.

Changes in existing technologies or the emergence of new products or technologies could significantly harm our business.

Our businesses change rapidly as new technologies are developed. These new technologies may cause our services and products to become obsolete. Changes in existing technologies could also cause demand for our products and services to decline. For example, if changes in technology allow digital television subscribers to use devices such as personal computers, cable ready televisions and network based digital video recording services in place of set-top boxes, our customers may not need to purchase our set-top boxes to provide their digital television subscribers with digital video recording and other set-top box features. One or more new technologies also could be introduced that compete favorably with our set-top boxes or that cause our set-top boxes to no longer be of significant benefit to our customers.

We and our suppliers also may not be able to keep pace with technological developments. Alternatively, if the new technologies on which we intend to focus our research and development investments fail to achieve acceptance in the marketplace, we could suffer a material adverse effect on our future competitive position that could cause a reduction in our revenues and earnings. Our competitors could also obtain or develop proprietary technologies that are perceived by the market as being superior to ours. Further, after we have incurred substantial research and development costs, one or more of the technologies under our development, or under development by one or more of our strategic partners, could become obsolete prior to its introduction. Finally, delays in the delivery of components or other unforeseen problems may occur that could materially and adversely affect our ability to generate revenue, offer new services and remain competitive.

Technological innovation is important to our success and depends, to a significant degree, on the work of technically skilled employees. Competition for the services of these types of employees is intense. We may not be able to attract and retain these employees. If we are unable to attract and maintain technically skilled employees, our competitive position could be materially and adversely affected.

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We intend to make significant investments in new products and services that may not be profitable.

We have made and will continue to make significant investments in research, development, and marketing for new products, services, and technologies, including new set-top box designs and entry into new business areas. Investments in new technology are inherently speculative and commercial success depends on many factors including novelty, service and support, and effective sales and marketing. We may not achieve significant revenue from new product and service investments for a number of years, if at all. Moreover, new products and services may not be profitable, and even if they are profitable, operating margins for new products and businesses may be minimal.

We rely on key personnel.

We believe that our future success will depend to a significant extent upon the performance of Charles W. Ergen, our Chairman and Chief Executive Officer and certain other executives. Mr. Ergen and certain of these executives will also continue to devote significant time to their employment at DISH Network. The loss of Mr. Ergen or of certain other key executives or their ability to devote sufficient time and effort to our business could have a material adverse effect on our business, financial condition and results of operations. Although all of our executives will execute agreements limiting their ability to work for or consult with competitors if they leave us, we do not have employment agreements with any of them.

Risks Affecting Our Set-Top Business

We depend on sales of set-top boxes for nearly all of our revenue, and if sales of our set-top boxes decline, our business and financial position will suffer.

Our historical revenues consist primarily of sales of our set-top boxes. In addition, we currently derive, and expect to continue to derive in the near term, nearly all of our revenue from sales of our set-top boxes to DISH Network and Bell ExpressVu. Continued market acceptance of our set-top boxes is critical to our future success. If we are not able to expand sales of our set-top boxes to other providers of digital television, including cable operators, our growth prospects will be limited, and our revenues will be substantially impacted if sales of our set-top boxes to providers of satellite-delivered digital television decline.

Our business may suffer if direct-to-home satellite service providers, who currently comprise our customer base, do not compete successfully with existing and emerging alternative platforms for delivering digital television, including terrestrial networks, internet protocol television and cable television operators.

Our existing customers are direct-to-home satellite video providers, which compete with cable television operators and terrestrial broadcasters for the same pool of viewers. As technologies develop, other means of delivering information and entertainment to television viewers are evolving. For example, some telecommunications companies, such as AT&T Inc. and Verizon Communications, are seeking to compete with terrestrial broadcasters, cable television network operators and direct-to-home satellite services by offering internet protocol television, which allows telecommunications companies to stream television programs through telephone lines or fiber optic lines. To the extent that the terrestrial television networks, telecommunications companies and cable television network operators compete successfully against direct-to-home satellite services for viewers, the ability of our existing customer base to attract and retain subscribers may be adversely affected. As a result, demand for our satellite television set-top boxes could decline and we may not be able to sustain our current revenue levels.

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Our future financial performance depends on our ability to penetrate new markets for set-top boxes.

Our products were initially designed for, and have been deployed mostly by, providers of satellite-delivered digital television. To date, we have not made any sales of our set-top boxes to cable operators. In addition, the cable set-top box market is highly competitive and we expect competition to intensify in the future. In particular, we believe that most cable set-top boxes are sold by a small number of well entrenched competitors who have long-standing relationships with cable operators. This competition may make it more difficult for us to sell cable set-top boxes, and may result in pricing pressure, small profit margins, high sales and marketing expenses and failure to obtain market share, any of which would likely seriously harm our business, operating results and financial condition.

Our ability to sell our set-top boxes to cable television operators depends on our ability to obtain licenses to use the conditional access systems utilized by these cable television operators.

Our commercial success in selling our set-top boxes to cable television operators depends significantly on our ability to obtain licenses to use the conditional access systems deployed by these operators in our set-top boxes. In many cases, the intellectual property rights to these conditional access systems are owned by the set-top box manufacturer that currently provides the cable television operator with its set-top boxes. We cannot assure you that we will able to obtain required licenses on commercially favorable terms, if at all. If we do not obtain the necessary licenses, we may be delayed or prevented from pursuing the development of some potential products with cable television operators. Our failure to obtain a license to any technology that we may require to develop or commercialize our set-top boxes with cable television operators will significantly and negatively affect our business.

Growth in our set-top box business likely requires expansion of our sales to international customers; we may be unsuccessful in expanding international sales.

We believe that in order to grow our set-top box revenue and business and to build a large customer base, we must increase sales of our set-top boxes in international markets. We have limited experience selling our set-top boxes internationally. To succeed in these sales efforts, we believe we must hire additional sales personnel and develop and manage new relationships with cable operators and other providers of digital television in international markets. If we do not succeed in our efforts to sell to these target markets and customers, the size of our total addressable market may be limited. This, in turn, would harm our ability to grow our customer base and revenue.

The set-top box business is extremely competitive.

Currently, there are many significant competitors in the set-top box business including several established companies who have sold set-top boxes to major cable operators in the United States for many years. These competitors include companies such as Motorola, Cisco Systems, which recently acquired Scientific Atlanta, and Pace. In addition, a number of rapidly growing companies have recently entered the market, many of them with set-top box offerings similar to our existing satellite set-top box products. We also expect additional competition in the future from new and existing companies who do not currently compete in the market for set-top boxes. As the set-top box business evolves, our current and potential competitors may establish cooperative relationships among themselves or with third parties, including software and hardware companies that could acquire significant market share, which could adversely affect our business. We also face competition from set-top boxes that have been internally developed by digital video providers. Any of these competitive threats, alone or in combination with others, could seriously harm our business, operating results and financial condition.

Our set-top boxes are highly complex and may experience quality or supply problems.

Our set-top boxes are extremely complex and can have defects in design, manufacture or associated software. Set-top boxes often contain “bugs” that can unexpectedly interfere with their operation. Defects may also occur in components and products that we purchase from third-parties. There can be no assurance that we will be able to detect and fix all defects in the set-top boxes that we sell. We could incur significant expenses, lost revenue, and harm to our reputation if we fail to detect or effectively address such issues through design, testing or warranty repairs.

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The average selling price of our set-top boxes may decrease, which could negatively impact our operating results.

Prior to our Spin-off from DISH Network, we sold set-top boxes to our largest customer, DISH Network, at our cost. In order to operate a profitable business we will be required to sell our set-top boxes to DISH Network and other customers at higher prices. It is possible that our ability to increase the average selling prices of our set-top boxes will be limited and that prices may decrease in the future in response to competitive pricing pressures, new product introductions by us or our competitors or other factors. If we are unable to increase or at least maintain the average selling prices of our set-top boxes, or if such selling prices decline, and we are unable to respond in a timely manner by developing and introducing new products and continually reducing our product costs, our revenues and gross margin may be negatively affected, which will harm our business and results of operations.

If significant numbers of television viewers are unwilling to pay for premium programming packages that utilize set-top boxes, we may not be able to sustain our current revenue level.

Our revenues are derived entirely from direct-to-home satellite service providers who purchase our set-top boxes for their subscribers. Therefore, we are substantially dependent upon the ability of these providers to promote the delivery of premium programming packages that utilize technology incorporated into our set-top boxes, such as DVR technology and IPTV, to generate future revenues.

However, direct-to-home satellite service providers may be unsuccessful in promoting value-added services or may promote alternative packages, such as free programming packages, in lieu of promoting packages that utilize our high-end set-top box offerings. Subscribers of direct-to-home satellite services have historically purchased stand-alone satellite receivers without the advanced set-top box functionality that we offer. If direct-to-home satellite service providers are unable to develop compelling reasons for their subscribers to purchase our more advanced set-top boxes, it will be difficult for us to sustain our historical revenues.

Our reliance on several key components used in our set-top boxes could restrict production and result in higher set-top box costs.

We obtain many components for our set-top boxes from a single supplier or a limited group of suppliers. Our reliance on a single or limited group of suppliers, particularly foreign suppliers, and our increasing reliance on subcontractors, involves several risks. These risks include a potential inability to obtain an adequate supply of required components, and reduced control over pricing, quality, and timely delivery of these components. We do not generally maintain long-term agreements with any of our suppliers or subcontractors. An inability to obtain adequate deliveries or any other circumstances requiring us to seek alternative sources of supply could affect our ability to ship our set-top boxes on a timely basis, which could damage our relationships with current and prospective customers and harm our business, resulting in a loss of market share, and reduce revenues and income.

We generally maintain low inventory levels and do not make binding long-term commitments to suppliers. As a result, it may be difficult in the future to obtain components required for our products or to increase the volume of components if demand for our products increases.

Our future growth depends on market acceptance of HDTV.

Future demand for our set-top boxes will depend significantly on the growing market acceptance of high definition television, or HDTV. The effective delivery of HDTV will depend on digital television operators developing and building infrastructure to provide wide-spread HDTV programming. If the introduction or adoption of HDTV or the deployment of HDTV is not as widespread or as rapid as we or our customers expect, our revenue growth will be limited.

During January 2008, the U.S. Court of Appeals upheld a Texas jury verdict that certain of our digital video recorders, or DVRs, infringed a patent held by Tivo.

If we are unsuccessful in subsequent appeals or in defending against claims that our alternate technology does not infringe on Tivo’s patent, we could be prohibited from distributing DVRs or be required to modify or eliminate certain user-friendly DVR features that we currently offer to consumers. In that event, we would be at a significant disadvantage to our competitors who could offer this functionality and, while we would attempt to provide that functionality through other manufacturers, the adverse affect on our business could be material. To the extent that DISH Network does not indemnify us, we could also have to pay substantial additional damages.

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Risks Affecting Our Fixed Satellite Services Business

We currently face competition from established competitors in the fixed satellite service business and may face competition from others in the future.

In our fixed satellite services business, we will compete against larger, well-established fixed satellite service companies, such as Intelsat, SES Americom and Telesat Canada. Because the satellite services industry is relatively mature, our growth strategy depends largely on our ability to displace current incumbent providers, which often have the benefit of long-term contracts with customers. These long-term contracts and other factors result in relatively high switching costs for customers, making it more difficult for us to displace customers from their current relationships with our competitors. In addition, the supply of satellite capacity has increased in recent years, which will make it more difficult for us to sell our services in certain markets and to price our capacity at acceptable levels. Competition may cause downward pressure on prices and further reduce the utilization of our fleet capacity, both of which would have an adverse effect on our financial performance. Our fixed satellite services business also competes with fiber optic cable and other terrestrial delivery systems, which may have a cost advantage, particularly in point-to-point applications where such delivery systems have been installed.

Our satellites are subject to significant operational risks.

Satellites are subject to significant operational risks while in orbit. These risks include malfunctions, commonly referred to as anomalies, that have occurred in our satellites and the satellites of other operators as a result of various factors, such as satellite manufacturers’ errors, problems with the power systems or control systems of the satellites and general failures resulting from operating satellites in the harsh environment of space.

Although we work closely with the satellite manufacturers to determine and eliminate the cause of anomalies in new satellites and provide for redundancies of many critical components in the satellites, we may experience anomalies in the future, whether of the types described above or arising from the failure of other systems or components.

Any single anomaly or series of anomalies could materially and adversely affect our operations and revenues and our relationship with current customers, as well as our ability to attract new customers for our satellite services. In particular, future anomalies may result in the loss of individual transponders on a satellite, a group of transponders on that satellite or the entire satellite, depending on the nature of the anomaly. Anomalies may also reduce the expected useful life of a satellite, thereby reducing the revenue that could be generated by that satellite, or create additional expenses due to the need to provide replacement or back-up satellites.

Meteoroid events pose a potential threat to all in-orbit satellites. The probability that meteoroids will damage those satellites increases significantly when the Earth passes through the particulate stream left behind by comets. Occasionally, increased solar activity also poses a potential threat to all in-orbit satellites.

Some decommissioned spacecraft are in uncontrolled orbits which pass through the geostationary belt at various points and present hazards to operational spacecraft, including our satellites. We may be required to perform maneuvers to avoid collisions and these maneuvers may prove unsuccessful or could reduce the useful life of the satellite through the expenditure of fuel to perform these maneuvers. The loss, damage or destruction of any of our satellites as a result of an electrostatic storm, collision with space debris, malfunction or other event could have a material adverse effect on our business, financial condition and results of operations.

Our satellites have minimum design lives of 12 years, but could fail or suffer reduced capacity before then.

Our ability to earn revenue depends on the usefulness of our satellites. Each satellite has a limited useful life. A number of factors affect the useful lives of the satellites, including, among other things, the quality of their construction, the durability of their component parts, the ability to continue to maintain proper orbit and control over the satellite’s functions, the efficiency of the launch vehicle used, and the remaining on-board fuel following orbit insertion. Generally, the minimum design life of each of our satellites is 12 years. We can provide no assurance, however, as to the actual useful lives of the satellites.

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In the event of a failure or loss of any of our satellites, we may relocate another satellite and use it as a replacement for the failed or lost satellite, which could have a material adverse effect on our business, financial condition and results of operations. Such a relocation would require FCC approval and, among other things, a showing to the FCC that the replacement satellite would not cause additional interference compared to the failed or lost satellite. We cannot be certain that we could obtain such FCC approval.

Our satellites are subject to risks related to launch.

Satellite launches are subject to significant risks, including launch failure, incorrect orbital placement or improper commercial operation. Certain launch vehicles that may be used by us have either unproven track records or have experienced launch failures in the past. The risks of launch delay and failure are usually greater when the launch vehicle does not have a track record of previous successful flights. Launch failures result in significant delays in the deployment of satellites because of the need both to construct replacement satellites, which can take more than two years, and to obtain other launch opportunities. Such significant delays could materially and adversely affect our ability to generate revenues. If we were unable to obtain launch insurance, or obtain launch insurance at rates we deem commercially reasonable, and a significant launch failure were to occur, it could have a material adverse effect on our ability to generate revenues and fund future satellite procurement and launch opportunities. In addition, the occurrence of launch failures whether on our satellites or those of others may significantly reduce the availability of launch insurance on our satellites or make launch insurance premiums uneconomical.

Our fixed satellite services business is subject to risks of adverse government regulation.

Our satellite services business is subject to varying degrees of regulation in the United States by the FCC, and other entities, and in foreign countries by similar entities. These regulations are subject to the political process and have been in constant flux over the past decade. Moreover, a substantial number of foreign countries in which we have, or may in the future make, an investment, regulate, in varying degrees, the ownership of satellites and the distribution and ownership of programming services and foreign investment in programming companies. Further material changes in law and regulatory requirements must be anticipated, and there can be no assurance that our business and the business of our affiliates will not be adversely affected by future legislation, new regulation or deregulation.

Our business depends substantially on FCC licenses that can expire or be revoked or modified and applications that may not be granted.

If the FCC were to cancel, revoke, suspend or fail to renew any of our licenses or authorizations, it could have a material adverse effect on our business, financial condition and results of operations. Specifically, loss of a frequency authorization would reduce the amount of spectrum available to us, potentially reducing the amount of services available to our customers. The materiality of such a loss of authorizations would vary based upon, among other things, the location of the frequency used or the availability of replacement spectrum. In addition, Congress often considers and enacts legislation that could affect us, and FCC proceedings to implement the Communications Act and enforce its regulations are ongoing. We cannot predict the outcomes of these legislative or regulatory proceedings or their effect on our business.

We may not be aware of certain foreign government regulations.

Because regulatory schemes vary by country, we may be subject to regulations in foreign countries of which we are not presently aware. If that were to be the case, we could be subject to sanctions by a foreign government that could materially and adversely affect our ability to operate in that country. We cannot assure you that any current regulatory approvals held by us are, or will remain, sufficient in the view of foreign regulatory authorities, or that any additional necessary approvals will be granted on a timely basis or at all, in all jurisdictions in which we wish to operate new satellites, or that applicable restrictions in those jurisdictions will not be unduly burdensome. The failure to obtain the authorizations necessary to operate satellites internationally could have a material adverse effect on our ability to generate revenue and our overall competitive position.

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We, our customers and companies with which we do business may be required to have authority from each country in which we or they provide services or provide our customers use of our satellites. Because regulations in each country are different, we may not be aware if some of our customers and/or companies with which we do business do not hold the requisite licenses and approvals.

Our dependence on outside contractors could result in delays related to the design, manufacture and launch of our new satellites, which could in turn adversely affect our operating results.

There are a limited number of manufacturers that are able to design and build satellites according to the technical specifications and standards of quality we require, including Astrium Satellites, Boeing Satellite Systems, Lockheed Martin, Loral and Thales Alenia Space. There are also a limited number of agencies able to launch such satellites, including International Launch Services, Arianespace, United Launch Alliance and Sea Launch Company. The loss of any of our manufacturers or launch agencies could result in the delay of the design, building or launch of our satellites. Even if alternate suppliers for such services are available, we may have difficulty identifying them in a timely manner, we may incur significant additional expense in changing suppliers, and this could result in difficulties or delays in the design, manufacturing or launch of our satellites. Any delays in the design, building or launch of our satellites could have a material adverse effect on our business, financial condition and results of operations.

We currently have no commercial insurance coverage on the satellites we own.

We do not insure our owned satellites against in-orbit or other failures. The loss of a satellite or other satellite malfunctions or anomalies could have a material adverse effect on our financial performance which we may not be able to mitigate by using available capacity on other satellites. In addition, the loss of a satellite or other satellite malfunctions or anomalies could affect our ability to comply with FCC regulatory obligations and our ability to fund the construction or acquisition of replacement satellites for our in-orbit fleet in a timely fashion, or at all.

Risks Relating to the Spin-Off

Our agreements with DISH Network may not reflect what two unaffiliated parties might have agreed to.

The allocation of assets, liabilities, rights, indemnifications and other obligations between DISH Network and us under the separation and ancillary agreements we entered into with DISH Network do not necessarily reflect what two unaffiliated parties might have agreed to. Had these agreements been negotiated with unaffiliated third parties, their terms may have been more favorable, or less favorable, to us.

We will have potential conflicts of interest with DISH Network.

Questions relating to conflicts of interest may arise between DISH Network and us in a number of areas relating to our past and ongoing relationships. Areas in which conflicts of interest between DISH Network and us could arise include, but are not limited to, the following:

Cross officerships, directorships and stock ownership. We will continue to have significant overlap in directors and executive officers with DISH Network, which may lead to conflicting interests. Certain of our executive officers, including Charles W. Ergen, our Chairman and Chief Executive Officer, also serve as executive officers of DISH Network. Three of these individuals provide us services pursuant to a management services agreement we will enter into with DISH Network. Our board of directors will include persons who are members of the board of directors of DISH Network, including Mr. Ergen, who will serve as the Chairman of DISH Network and us. The executive officers and the members of our board of directors who overlap with DISH Network have fiduciary duties to DISH Network’s shareholders. Pursuant to the management services agreement, three of these officers will be paid by DISH Network even if their duties include work for EchoStar. Therefore, these individuals may have actual or apparent conflicts of interest with respect to matters involving or affecting each company. For example, there will be the potential for a conflict of interest when we or DISH Network look at acquisitions and other corporate opportunities that may be suitable for both companies. In addition, many of our directors and officers own DISH Network stock and options to purchase DISH Network stock, which they acquired or were granted prior to the Spin-off, including Mr. Ergen, who beneficially owns approximately 50.0% of the total equity and control approximately 80.0% of the voting power of DISH Network and us. These ownership interests could create actual, apparent or potential conflicts of interest when these individuals are faced with decisions that could have different implications for our company and DISH Network.

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Intercompany agreements related to the Spin-off. We have entered into agreements with DISH Network pursuant to which it will provide us certain management, administrative, accounting, tax, legal and other services, for which we will pay DISH Network an amount equal to DISH Network’s cost plus an additional amount that is equal to a fixed percentage of DISH Network’s cost. In addition, we will enter into a number of intercompany agreements covering matters such as tax sharing and our responsibility for certain liabilities previously undertaken by DISH Network for certain of our businesses. We will also enter into certain commercial agreements with DISH Network pursuant to which we will, among other things, be obligated to sell at specified prices, set-top boxes and related equipment to DISH Network. The terms of these agreements were established while we were a wholly-owned subsidiary of DISH Network and were not the result of arm’s length negotiations. In addition, conflicts could arise in the interpretation or any extension or renegotiation of these existing agreements.

Future intercompany transactions. In the future, DISH Network or its affiliates may enter into transactions with us or our subsidiaries or other affiliates. Although the terms of any such transactions will be established based upon negotiations between DISH Network and us and, when appropriate, subject to the approval of the independent directors on our board or a committee of disinterested directors, there can be no assurance that the terms of any such transactions will be as favorable to us or our subsidiaries or affiliates as may otherwise be obtained in arm’s length negotiations.

Business Opportunities. DISH Network will retain its interests in various U.S. and international companies that have subsidiaries or controlled affiliates that own or operate domestic or foreign services that may compete with services offered by our businesses. We may also compete with DISH Network when we participate in auctions for spectrum or orbital slots for our satellites.

We may not be able to resolve any potential conflicts, and, even if we do so, the resolution may be less favorable to us than if we were dealing with an unaffiliated party.

We do not have any agreements with DISH Network that restrict us from selling our products to competitors of DISH Network. We also do not have any agreements with DISH Network that would prevent us from competing with each other.

In addition, the corporate opportunity policy set forth in our articles of incorporation addresses potential conflicts of interest for officers and directors of DISH Network who are also officers or directors of us. This policy could restrict our ability to take advantage of certain corporate opportunities.

We may incur material costs and expenses as a result of our separation from DISH Network.

We may incur costs and expenses greater than those we currently incur as a result of our separation from DISH Network. These increased costs and expenses may arise from various factors, including financial reporting, costs associated with complying with federal securities laws (including compliance with the Sarbanes-Oxley Act of 2002), tax administration and human resources related functions. Although DISH Network will continue to provide many of these services to us under the services agreement, such services are for a limited period of time. We cannot assure you that these costs will not be material to our business.

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Risks Relating to our Common Stock and the Securities Market

If, we are unable to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or our internal control over financial reporting is not effective, the reliability of our financial statements may be questioned and our stock price may suffer.

Section 404 of the Sarbanes-Oxley Act of 2002 requires any company subject to the reporting requirements of the U.S. securities laws to do a comprehensive evaluation of its and its consolidated subsidiaries’ internal control over financial reporting. To comply with this statute, we will eventually be required to document and test our internal control procedures, our management will be required to assess and issue a report concerning our internal control over financial reporting, and our independent auditors will be required to issue an opinion on management’s assessment of those matters. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation to meet the detailed standards under the rules. During the course of its testing, our management may identify material weaknesses or deficiencies which may not be remedied in time to meet the deadline imposed by the Sarbanes-Oxley Act. If our management cannot favorably assess the effectiveness of our internal control over financial reporting or our auditors identify material weaknesses in our internal controls, investor confidence in our financial results may weaken, and our stock price may suffer.

It may be difficult for a third party to acquire us, even if doing so may be beneficial to our shareholders.

Certain provisions of our certificate of incorporation and bylaws may discourage, delay or prevent a change in control of our company that a shareholder may consider favorable. These provisions include the following:

a capital structure with multiple classes of common stock: a Class A that entitles the holders to one vote per share, a Class B that entitles the holders to ten votes per share, a Class C that entitles the holders to one vote per share, except upon a change in control of our company in which case the holders of Class C are entitled to ten votes per share and a non-voting Class D;

a provision that authorizes the issuance of “blank check” preferred stock, which could be issued by our board of directors to increase the number of outstanding shares and thwart a takeover attempt;

a provision limiting who may call special meetings of shareholders; and

a provision establishing advance notice requirements for nominations of candidates for election to our board of directors or for proposing matters that can be acted upon by shareholders at shareholder meetings.

In addition, pursuant to our certificate of incorporation we have a significant amount of authorized and unissued stock which would allow our board of directors to issue shares to persons friendly to current management, thereby protecting the continuity of its management, or which could be used to dilute the stock ownership of persons seeking to obtain control of us.

We are controlled by one principal shareholder.

Charles W. Ergen, our Chairman and Chief Executive Officer, beneficially owns approximately 50.0% of our total equity securities and possess approximately 80.0% of the total voting power. Thus, Mr. Ergen has the ability to elect a majority of our directors and to control all other matters requiring the approval of our shareholders. As a result of Mr. Ergen’s voting power, we are a “controlled company” as defined in the Nasdaq listing rules and, therefore, are not subject to Nasdaq requirements that would otherwise require us to have (i) a majority of independent directors; (ii) a nominating committee composed solely of independent directors; (iii) compensation of our executive officers determined by a majority of the independent directors or a compensation committee composed solely of independent directors; and (iv) director nominees selected, or recommended for the Board’s selection, either by a majority of the independent directors or a nominating committee composed solely of independent directors. Mr. Ergen also beneficially owns approximately 50.0% of the total equity and 80.0% of the total voting power of DISH Network and continues to be the Chairman and Chief Executive Officer of DISH Network, which directly and through its subsidiaries continues to be our largest customer, accounting for a substantial majority of our revenues.

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Holders of any single class of our common stock may not have any remedies if any action by our directors or officers has an adverse effect on only that series of our common stock.

Principles of Nevada law and the provisions of our certificate of incorporation may protect decisions of our board of directors that have a disparate impact upon holders of any single class of our common stock. Under Nevada law, the board of directors has a duty to act with due care and in the best interests of all of our shareholders, including the holders of all classes of our common stock. Principles of Nevada law established in cases involving differing treatment of multiple classes or series of stock provide that a board of directors owes an equal duty to all common shareholders regardless of class or series and does not have separate or additional duties to any group of shareholders. As a result, in some circumstances, our directors may be required to make a decision that is adverse to the holders of one class of our common stock. Under the principles of Nevada law referred to above, you may not be able to challenge these decisions if our board of directors is disinterested and adequately informed with respect to these decisions and acts in good faith and in the honest belief that it is acting in the best interests of all of our shareholders.

We do not intend to pay dividends for the foreseeable future.

We have never declared or paid any dividends on our common stock. We intend to retain any earnings to finance the operation and expansion of our business, and we do not anticipate paying any cash dividends in the future. As a result, you may only receive a return on your investment in our common stock if the market price of our common stock increases.

Item 1B.

UNRESOLVED STAFF COMMENTS

None.

Item 2.

PROPERTIES

The following table sets forth certain information concerning our principal properties related to our set-top box business (“STB”), our fixed satellite services business (“FSS”) and our other businesses related to our real estate leases (“Other”). We operate various facilities in the United States and abroad. We believe that our facilities are well maintained and are sufficient to meet our current and projected needs.

Description/Use/Location	Segment(s) Using Property	Approximate Square Footage	Owned or Leased

Corporate headquarters, Englewood, Colorado	Other	476,000	Owned
EchoStar Technologies Corporation engineering offices and service center, Englewood, Colorado	STB	144,000	Owned
EchoStar Technologies Corporation engineering offices, Englewood, Colorado	STB	124,000	Owned
Digital broadcast operations center, Cheyenne, Wyoming	FSS	143,000	Owned
Digital broadcast operations center, Gilbert, Arizona	FSS	124,000	Owned
Regional digital broadcast operations center, Monee, Illinois	FSS	45,000	Owned
Regional digital broadcast operations center, New Braunsfels, Texas	FSS	35,000	Owned
Regional digital broadcast operations center, Quicksberg, Virginia	FSS	35,000	Owned
Regional digital broadcast operations center, Spokane, Washington	FSS	35,000	Owned
Regional digital broadcast operations center, Orange, New Jersey	FSS	8,800	Owned
Customer call center and data center, Littleton, Colorado	Other	202,000	Owned
Customer call center, Thornton, Colorado	Other	55,000	Owned
Engineering offices and warehouse, Almelo, The Netherlands	STB	55,000	Owned
Engineering offices, Steeton, England	STB	43,000	Owned

Under the terms of our separation from DISH Network, we will lease portions of certain of our owned facilities to DISH Network. See “Certain Intercompany Agreements — Agreements with DISH Network — Real Estate Lease Agreements” set forth in our Proxy Statement for the 2008 Annual Meeting of Shareholders under the caption “Certain Relationships and Related Transactions.”

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Item 3. LEGAL PROCEEDINGS

Separation Agreement

In connection with the Spin-off, we have entered into a separation agreement with DISH Network, which provides for, among other things, the division of liability resulting from litigation. Under the terms of the separation agreement, we have assumed liability for any acts or omissions that relate to our business whether such acts or omissions occurred before or after the Spin-off. Certain exceptions are provided, including for intellectual property related claims generally, whereby we will only be liable for our acts or omissions that occurred following the Spin-off. In accordance with these terms of the separation agreement, we may be partially or completely responsible for any liability resulting from the legal proceedings described below.

Acacia

During 2004, Acacia Media Technologies, (“Acacia”) filed a lawsuit against us and DISH Network in the United States District Court for the Northern District of California. The suit also named DirecTV, Comcast, Charter, Cox and a number of smaller cable companies as defendants. Acacia is an intellectual property holding company which seeks to license the patent portfolio that it has acquired. The suit alleges infringement of United States Patent Nos. 5,132,992 (the ‘992 patent), 5,253,275 (the ‘275 patent), 5,550,863 (the ‘863 patent), 6,002,720 (the ‘720 patent) and 6,144,702 (the ‘702 patent). The ‘992, ‘863, ‘720 and ‘702 patents have been asserted against us.

The patents relate to various systems and methods related to the transmission of digital data. The ‘992 and ‘702 patents have also been asserted against several Internet content providers in the United States District Court for the Central District of California. During 2004 and 2005, the Court issued Markman rulings which found that the ‘992 and ‘702 patents were not as broad as Acacia had contended, and that certain terms in the ‘702 patent were indefinite. In April 2006, DISH Network and other defendants asked the Court to rule that the claims of the ‘702 patent are invalid and not infringed. That motion is pending. In June and September 2006, the Court held Markman hearings on the ‘992, ‘863, ‘720 and ‘275 patents, and issued a ruling during December 2006.

Acacia’s various patent infringement cases have been consolidated for pre-trial purposes in the United States District Court for the Northern District of California. We and DISH Network intend to vigorously defend this case. In the event that a Court ultimately determines that we and DISH Network infringe any of the patents, we may be subject to substantial damages, which may include treble damages and/or an injunction that could require us to materially modify certain user-friendly features that we currently offer to consumers. We are being indemnified by DISH Network for any potential liability or damages resulting from this suit relating to the period prior to the effective date of the Spin-off.

Broadcast Innovation, L.L.C.

In 2001, Broadcast Innovation, L.L.C. (“Broadcast Innovation”) filed a lawsuit against DISH Network, DirecTV, Thomson Consumer Electronics and others in Federal District Court in Denver, Colorado. The suit alleges infringement of United States Patent Nos. 6,076,094 (the ‘094 patent) and 4,992,066 (the ‘066 patent). The ‘094 patent relates to certain methods and devices for transmitting and receiving data along with specific formatting information for the data. The ‘066 patent relates to certain methods and devices for providing the scrambling circuitry for a pay television system on removable cards. We examined these patents and believe that they are not infringed by any of our products or services. Subsequently, DirecTV and Thomson settled with Broadcast Innovation leaving us as the only defendant.

During 2004, the judge issued an order finding the ‘066 patent invalid. Also in 2004, the Court ruled the ‘094 patent invalid in a parallel case filed by Broadcast Innovation against Charter and Comcast. In 2005, the United States Court of Appeals for the Federal Circuit overturned the ‘094 patent finding of invalidity and remanded the case back to the District Court. During June 2006, Charter filed a reexamination request with the United States Patent and Trademark Office. The Court has stayed the case pending reexamination. Our case remains stayed pending resolution of the Charter case.

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We and DISH Network intend to vigorously defend this case. In the event that a Court ultimately determines that we and DISH Network infringe any of the patents, we may be subject to an injunction that could require us to materially modify certain user-friendly features that we currently offer to consumers. We are being indemnified by DISH Network for any potential liability or damages resulting from this suit relating to the period prior to the effective date of the Spin-off.

Finisar Corporation

Finisar Corporation (“Finisar”) obtained a $100 million verdict in the United States District Court for the Eastern District of Texas against DirecTV for patent infringement. Finisar alleged that DirecTV’s electronic program guide and other elements of its system infringe United States Patent No. 5,404,505 (the ‘505 patent).

In July 2006, DISH Network, together with NagraStar LLC, filed a Complaint for Declaratory Judgment in the United States District Court for the District of Delaware against Finisar that asks the Court to declare that they and we do not infringe, and have not infringed, any valid claim of the ‘505 patent. Trial is not currently scheduled. The District Court has stayed our action until the Federal Circuit has resolved DirecTV’s appeal.

We and DISH Network intend to vigorously prosecute this case. In the event that a Court ultimately determines that we and DISH Network infringe this patent, we may be subject to an injunction that could require us to materially modify certain user-friendly features that we currently offer to consumers. We are being indemnified by DISH Network for any potential liability or damages resulting from this suit relating to the period prior to the effective date of the Spin-off.

Global Communications

On April 19, 2007, Global Communications, Inc., which we refer to as Global, filed a patent infringement action against DISH Network in the United States District Court for the Eastern District of Texas. The suit alleges infringement of United States Patent No. 6,947,702 (the ‘702 patent). This patent, which involves satellite reception, was issued in September 2005. On October 24, 2007, the United States Patent and Trademark Office granted our request for reexamination of the ‘702 patent and issued an Office Action finding that all of the claims of the ‘702 patent were invalid. Based on the PTO’s decision, we have asked the District Court to stay the litigation until the reexamination proceedings is concluded.

We and DISH Network intend to vigorously defend this case. In the event that a Court ultimately determines that we and DISH Network infringe the ‘702 patents, we may be subject to an injunction that could require us to materially modify certain user-friendly features that we currently offer to consumers. We are being indemnified by DISH Network for any potential liability or damages resulting from this suit relating to the period prior to the effective date of the Spin-off.

Superguide

During 2000, Superguide Corp. (“Superguide”) filed suit against DISH Network, DirecTV, Thomson and others in the United States District Court for the Western District of North Carolina, Asheville Division, alleging infringement of United States Patent Nos. 5,038,211 (the ‘211 patent), 5,293,357 (the ‘357 patent) and 4,751,578 (the ‘578 patent) which relate to certain electronic program guide functions, including the use of electronic program guides to control VCRs. Superguide sought injunctive and declaratory relief and damages in an unspecified amount.

On summary judgment, the District Court ruled that none of the asserted patents were infringed by us. These rulings were appealed to the United States Court of Appeals for the Federal Circuit. During 2004, the Federal Circuit affirmed in part and reversed in part the District Court’s findings and remanded the case back to the District Court for further proceedings. In 2005, Superguide indicated that it would no longer pursue infringement allegations with respect to the ‘211 and ‘357 patents and those patents have now been dismissed from the suit. The District Court subsequently entered judgment of non-infringement in favor of all defendants as to the ‘211 and ‘357 patents and ordered briefing on Thomson’s license defense as to the ‘578 patent. During December 2006, the District Court found that there were disputed issues of fact regarding Thomson’s license defense, and ordered a trial solely addressed to that issue. That trial took place in March 2007. In July 2007, the District Court ruled in favor of Superguide. As a result, Superguide will be able to proceed with their infringement action against us, DirecTV and Thomson.

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We and DISH Network intend to vigorously defend this case. In the event that a Court ultimately determines that we infringe the ‘578 patent, we may be subject to a portion of the final damages, which may include treble damages and/or an injunction that could require us to materially modify certain user-friendly electronic programming guide and related features that we currently offer to consumers. We are being indemnified by DISH Network for any potential liability or damages resulting from this suit relating to the period prior to the effective date of the Spin-off. We cannot predict with any degree of certainty the outcome of this suit.

Tivo Inc.

On January 31, 2008, the U.S. Court of Appeals for the Federal Circuit affirmed in part and reversed in part the April 2006 jury verdict concluding that certain of our digital video recorders, or DVRs, infringed a patent held by Tivo. In its decision, the Federal Circuit affirmed the jury’s verdict of infringement on Tivo’s “software claims,” upheld the award of damages from the district court, and ordered that the stay of the district court’s injunction against us, which was issued pending appeal, will dissolve when the appeal becomes final. The Federal Circuit, however, found that we did not literally infringe Tivo’s “hardware claims,” and remanded such claims back to the district court for further proceedings. We are appealing the Federal Circuit’s ruling.

In addition, we have developed and deployed ‘next-generation’ DVR software to our customers’ DVRs. This improved software is fully operational and has been automatically downloaded to current customers (the “Design-Around”). We have formal legal opinions from outside counsel that conclude that our Design-Around does not infringe, literally or under the doctrine of equivalents, either the hardware or software claims of Tivo’s patent.

If the Federal Circuit’s decision is upheld and Tivo decides to challenge the Design-Around, we will mount a vigorous defense. If we and DISH Network are unsuccessful in subsequent appeals or in defending against claims that the Design-Around infringes Tivo’s patent, we and DISH Network could also be prohibited from distributing DVRs, or be required to modify or eliminate certain user-friendly DVR features that we currently offer to consumers. In that event we and DISH Network would be at a significant disadvantage to our competitors who could offer this functionality and, while we and DISH Network would attempt to provide that functionality through other manufacturers, the adverse affect on our business could be material. We could also have to pay substantial additional damages.

Trans Video

In August 2006, Trans Video Electronic, Ltd. (“Trans Video”) filed a patent infringement action against us and DISH Network in the United States District Court for the Northern District of California. The suit alleges infringement of United States Patent Nos. 5,903,621 (the ‘621 patent) and 5,991,801 (the ‘801 patent). The patents relate to various methods related to the transmission of digital data by satellite. On May 14, 2007, we and DISH Network reached a settlement with Trans Video which did not have a material impact on our results of operations.

Other

In addition to the above actions, we are subject to various other legal proceedings and claims which arise in the ordinary course of business. In our opinion, the amount of ultimate liability with respect to any of these actions is unlikely to materially affect our financial position, results of operations or liquidity.

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Item 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No items were submitted to a vote of security holders during the fourth quarter of 2007.

PART II

Item 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information. Our Class A common stock is quoted on the Nasdaq Global Select Market under the symbol “SATS.” As of February 19, 2008, there were approximately 11,338 holders of record of our Class A common stock, not including stockholders who beneficially own Class A common stock held in nominee or street name. As of February 19, 2008, 41,611,830 of the 47,687,040 outstanding shares of our Class B common stock were held by Charles W. Ergen, our Chairman and Chief Executive Officer and the remaining 6,075,210 were held in a trust for members of Mr. Ergen’s family. There is currently no trading market for our Class B common stock. On February 19, 2008, the closing sale price per share of our common stock on the Nasdaq Global Select Market was $38.01.

Dividend. We currently do not intend to declare dividends on our common stock. Payment of any future dividends will depend upon our earnings, capital requirements, and other factors the Board of Directors considers appropriate. We currently intend to retain our earnings, if any, to support future growth and expansion. See “Item 7. - Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”

Securities Authorized for Issuance Under Equity Compensation Plans. See Item 12 – Security Ownership of Certain Beneficial Owners and Management.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

During October 2007, our Board of Directors authorized the purchase of up to $1.0 billion of our Class A common stock during 2008. During the period from October 1, 2007 through December 31, 2007, we did not repurchase any shares as our stock was not publicly traded. Purchases under our repurchase program may be made through open market purchases, privately negotiated transactions, or Rule 10b5-1 trading plans, subject to market conditions and other factors. We may elect not to purchase the maximum amount of shares allowable under this program and we may also enter into additional share repurchase programs authorized by our Board of Directors.

Item 6.

SELECTED FINANCIAL DATA

The following tables present selected historical information relating to our combined financial condition and results of operations for the past five years. The financial data for the three years ended December 31, 2007 has been derived from our audited combined financial statements for the corresponding periods. Data for the other periods presented has been derived from unaudited information. The data should be read in conjunction with our combined financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere herein. Our historical and pro forma financial data included in this report may not be indicative of our future performance and does not necessarily reflect what our financial condition and results of operations would have been had we operated as a separate, stand-alone entity during the periods presented, particularly since changes will occur in our operations and capitalization as a result of our Spin-off from DISH Network. Our audited combined financial statements reflect the historical financial position and results of operations of entities included in consolidated financial statements of DISH Network, representing almost exclusively DISH Network’s set-top box business, using the historical results of operations and historical bases of assets and liabilities of this business. Our historical combined financial statements reflect sales to DISH Network at cost and do not include certain satellites, uplink and satellite transmission assets, real estate and other assets and related liabilities that were contributed to us by DISH Network in the Spin-off. These assets and liabilities, which will primarily comprise our fixed satellite services business, have been separately audited and are included in the Statement of Net Assets to be Contributed by DISH Network and Unaudited Pro Forma Combined and Adjusted Financial Information included herein. The financial condition and results of operations of our fixed satellite services business have not been included in our historical combined financial statements because our fixed satellite services business was operated as an integral part of DISH Network’s subscription television business and did not constitute a “business” in the historical financial statements of DISH Network. DISH Network acquired Sling Media on October 19, 2007. Our historical financial data includes financial information for Sling Media from the acquisition date through December 31, 2007. Our unaudited pro forma combined financial statements include Sling Media’s financial information from January 1, 2007 to the acquisition date. See “Unaudited Pro Forma Combined and Adjusted Financial Information” under “The EchoStar Spin-off” above.

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	For the Years Ended December 31,
	2007
Statements of Operations Data:	Pro Forma			2007			2006			2005			2004			2003
	(Unaudited)															(Unaudited)
	(In thousands)
Revenue	$	2,088,256		$	1,544,065		$	1,525,320		$	1,513,691		$	1,720,091		$	976,636
Costs and Expenses:
Cost of sales (exclusive of depreciation and amortization)		1,627,844			1,451,704			1,439,919			1,438,499			1,650,775			886,665
Research and development		94,377			78,790			56,451			45,928			39,809			32,361
General and administrative, including sales and marketing		130,558			90,245			60,365			56,496			65,059			50,472
Depreciation and amortization		246,530			9,705			6,032			5,832			5,071			5,511
Total costs and expenses		2,099,309			1,630,444			1,562,767			1,546,755			1,760,714			975,009
Operating income (loss)	$	(11,053	)	$	(86,379	)	$	(37,447	)	$	(33,064	)	$	(40,623	)	$	1,627
Net income (loss)	$	(93,166	)	$	(85,300	)	$	(34,162	)	$	(44,940	)	$	(43,237	)	$	4,329

Pro forma earnings per share:
Basic	$	1.04
Diluted	$	1.03
Pro forma shares outstanding:
Basic		89,712
Diluted		90,167

	As of December 31,
	2007
Balance Sheet Data:	Pro Forma		2007		2006		2005		2004		2003
	(Unaudited)								(Unaudited)		(Unaudited)
	(In thousands)
Cash, cash equivalents and marketable securities	$	1,532,267	$	532,267	$	323,576	$	106,109	$	143,437	$	156,814
Restricted cash.	$	3,150	$	-	$	-	$	1,581	$	1,699	$	1,523
Total assets	$	3,882,533	$	1,260,910	$	517,821	$	229,392	$	277,843	$	248,811
Long-term debt (including current portion)	$	382,419	$	3,709	$	-	$	495	$	647	$	2,214
Net investment in EchoStar	$	3,275,856	$	1,207,518	$	502,283	$	217,132	$	258,452