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XM Will Focus On OEM

12/06/2006 03:24:00 PM Eastern

New York — XM Satellite Radio said it will begin broadcasting from its newly launched XM-4 satellite next week and acknowledged weaker than expected retail sales for satellite radio, in a recent presentation here at the UBS 34th Annual Media and Communications Conference by XM chairman Gary Parsons.

The XM-4 launch was successful he said and that the capital expenditures for the launch are “now behind us.” Parsons also said that XM is now putting greater emphasis on the OEM sector because of slower satellite radio sales at retail.

“Our central focus is on OEM. It’s where we believe the market is going,” he said, adding, “We are not going to chase a weak retail market with excessive marketing and excessive subscriber acquisition costs. We think we can get the more cost efficient OEM channel in gear.” At the same time, he said, XM is not abandoning the retail marketplace. “We just believe in the future, it will get somewhat less of management resources. When it’s in a hot cycle, we’ll support it more. We’re not going to chase it when it’s weak.”

Parsons said the shift to OEM was expected, “but it occurred faster this year than we had expected.”

Sirius and XM have lowered their subscriber forecasts this year. On Tuesday, Sirius lowered its guidance from a previously stated 6.3 million, to a projected 5.9 million to 6.1 million total subscribers by the end of the year, citing slower than anticipated sales since the Thanksgiving weekend.

Parsons attributed some of the softness to competition with other consumer electronics products such as plasma TVs and new video game consoles.

In terms of future retail products, XM said that it expects to see greater cellphone integration this year beyond the current deals with Alltel and Cingular that stream only a limited number of XM channels.

He also noted that 2.5 million cars are expected to ship with XM radios this year from GM and Honda alone.

Parsons said he thought the current negotiations with the record labels on performance rights could be resolved by arbitration in one year.

He also reiterated that XM expects to be cash flow positive from operations this current quarter.

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