WSJ Comments On Sirius Earnings
Sirius Posts Narrower Loss On Subscription, Revenue Growth
By HENRY SANDERSONMay 1, 2007 10:47 a.m., The Wall Street Journal
Sirius Satellite Radio Inc., which is seeking approval to merge with rival XM Satellite Radio Holding Inc., reported a narrower first-quarter loss Tuesday, but weak growth of subscribers at the retail level raised concerns about the penetration of satellite radio.
Sirius, a subscriber-based radio service whose programming includes sports, music and shock jock Howard Stern, said it added 556,490 new subscribers during the quarter, compared with 761,187 a year ago. The year-ago number was boosted by the new arrival of Mr. Stern.
However, the acquisition of subscribers at the retail level fell to 193,000 from 535,000 in the year-ago period, J.P. Morgan analyst Barton Crockett wrote in a note to clients.
Churn, the rate of monthly customer losses, was 2.3% in the quarter compared with 1.8% a year before, which raised concern among analysts, even though the first-quarter loss was narrower than what most of Wall Street expected.
Sirius said it had a first-quarter loss of $144.8 million, or 10 cents a share, compared with a loss of $458.5 million, or 33 cents a share, a year ago. Excluding stock-based compensation expense, the company said its loss narrowed to $120.5 million, or eight cents a share, from $174 million, or 13 cents a share.
The company said revenue rose to $204 million from $126.7 million a year earlier. On average, analysts polled by Thomson Financial expected a loss of 11 cents a share on revenue of $212 million.
For 2007, the New York company said it expects 2007 revenue to approach $1 billion with more than eight million subscribers. It expects to ramp up its deals with major auto makers which will feature Sirius satellite radios in their cars. The company's OEM channel accounted for a large bulk of subscriber additions in the first quarter.
"Overall, our exclusive OEM partners are dramatically ramping [up] the number of vehicles in which Sirius service is included," Chief Executive Mel Karmazin said during a conference call with analysts.
The company said that, along with other auto makers, last week Mercedes, a unit of DaimlerChrysler AG, announced that Sirius will be installed in 80% of its cars this year, and 90% next year. The company also said that Ford Motor Co.'s Mercury division will start a two-month national promotion featuring Sirius in its models. It also expects Ford to double the number of vehicles shipped with Sirius radios from nearly 600,000 at the moment.
However, Banc of America analyst Jonathan Jacoby said Sirius counts subscribers at the time of vehicle production rather the time of sale, which is less indicative of true consumer demand.
"This suggests the biggest boost to the subscriber base in the first quarter has come from "car-lot" subscriptions," he wrote in a research note.
XM Satellite, a Washington company whose radio show hosts include Oprah Winfrey and shock jocks Opie and Anthony, agreed in February to be acquired by Sirius in a $13.6 billion deal, with Sirius paying 4.6 shares for each XM share.
Sirius Chief Executive Mel Karmazin said Tuesday he is "confident" that the merger will be completed by the end of 2007.
The proposed merger has attracted regulatory scrutiny as lawmakers in Congress have questioned whether a union of the only two U.S. satellite-radio service providers would be good for consumers. While Federal Communications Commission rules now bar such a merger, the companies are seeking approval from the FCC and the Justice Department's antitrust division....read more:
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