Directed Expects Drop In Sirius Sales For 2007

VISTA, CALIF. — After posting 50 percent gains in satellite radio sales for 2006, Sirius Satellite Radio distributor Directed Electronics said that its Sirius product sales will drop by 40 percent for the first quarter of 2007, as retailers work through excess inventory accrued in the fourth quarter.

Directed president and CEO Jim Minarik acknowledged that retailers were left with 30 to 90 days of excess inventory of Sirius products, depending on the dealer, at the end of last year. But dealers are now working through that inventory, and some are beginning to reorder in larger quantities, he told analysts on an earnings call this month.

This year, Directed expects sales of satellite radio to decline by 11 percent to 22 percent for the company with most of the shortfall experienced in the first half, as Sirius sales will be compared against those in early 2005 when Howard Stern first came to Sirius.

Directed executive VP Ron Dutt noted that Sirius expects 2 million new subscribers this year compared with 2.7 million last year. "This reduction in demand along with higher inventories will have a negative impact on sales for 2007," he said.

During 2006, Directed expanded its distribution of Sirius to stores including Wal-Mart, Costco, Sam's Club and Staples.

Minarik also said Directed is "well positioned to take advantage of the launch of Sirius satellite TV later this year. Directed comprises over 90 percent of Sirius' after-market volume, it said.

As it announced record earnings for the fourth quarter, ended Dec. 31, 2006 (see p. 45), Directed said it expects this year to increase its overall net sales by 8 percent to 16 percent over 2006.