Morgan Stanley On April 2007 NPD

May 24, 2007
Tyler Savery

Ben Swinburne of Morgan stanley published these comments regarding April 2007 NPD:

NPD Data Shows DARS April Sales down 24% YoY

Quick Comment:

April NPD satellite radio results display a 24% YoY retail category sales decline versus a 33% YoY decline in February and 29% in March. The 24% category decline in April suggests that our estimated 8% category decline forecast for the quarter could prove too optimistic. We would expect actual retail gross adds trends to be better than reported NPD results, because NPD does not include Wal-Mart or direct sales (online channel) which are both growing faster than other traditional retail channels. We also believe 2Q07 sales could benefit from seasonal Father’s Day demand as well as easier YoY comps resulting from retail product interruptions during 2Q and 3Q06. Specifically with XM, its FM modulator issues with the
FCC and the impact on radio supply began in 2Q06. We note that we are above consensus on 2Q07 retail net additions for the industry.

SIRI showed its first material market share improvement in April since December 2006, moving up to 55.5% of reported NPD sales. According to NPD (which excludes direct sales and wholesale retailer data) SIRI and XMSR retail category sales declined roughly 21% and 27%, respectively. XM sales declines in April resulted despite lowering ASPs 17% YoY compared to 2% at SIRI.

Implications:

Continued weaker retail category trends further highlight the importance of OEM adds for subscriber growth for both XM and SIRI. While April NPD data suggests our current forecast could be aggressive, we forecast XM and SIRI retail gross adds declining 4% and 12% in 2Q07 and 9% and 14%, respectively for FY07. Our category forecast assumes SIRI maintains its share advantage throughout the year.

XM’s market share fell back down to the 44-45% level in April after improving ~300 basis points in March. As discussed previously, we believe XM’s March sequential share gains were likely due to the beginning of the Major League Baseball season.

5/24/2007 01:53:00 PM

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