Sirius Satellite Radio said it will expand its radio sales in the used-car market and the company continued to assert optimism that its planned merger with XM will be approved shortly.
CEO Mel Karmazin said this during a conference call with financial analysts in late February, where he reported higher sales for the year and the fourth quarter and reduced losses for both time periods.
"We are optimistic we will hear favorable information from [federal regulators] in the near future," he said. The merger agreement between Sirius and XM had a termination clause of March 1, 2008, but it was extended by both companies until May 1.
Although optimistic that a merger will be approved, Karmazin said, "Sirius is well positioned whether we combine with XM or continue as a stand-alone company." He added," The high fixed cost nature of our business is a disadvantage in the early years, but really pays off for us once we are beyond break-even and continue to grow."
Sirius said it plans to announce sales programs in certified pre-owned vehicles offered by all of Sirius' exclusive OEM partners. The company launched a program with Ford pre-owned cars in February and said used cars represent "a very significant opportunity" over the next three to five years. The market sells about 40 million vehicles annually.
During the conference call regarding fourth-quarter results, Sirius said it had a record year in satellite radio for gross subscriber additions, which reached 4.2 million in 2007. Total subscriber base increased 38 percent for the year to 8.3 million, meeting or slightly exceeding expectations.
Much of the subscriber additions were generated by new car sales while retail sales declined, even while Sirius increased its retail share to 68 percent, a record level, according to The NPD Group, which XM later disputed. (See story at right.)
Sirius reported 598,883 net new retail subscribers in 2007 compared with 1.6 million in 2006. For the fourth quarter net new retail subscribers were 211,962 compared with 560,000 for the period a year ago.
Retail declines were attributed to consumer confusion about the pending merger as well as the slower economy and competition from other consumer electronics devices, Karmazin said.
OEM subscriber net additions for the year increased to 1.7 million compared with 1.1 million in 2006. Fourth-quarter OEM sales also gained to 444,244 net additions, up from 348,935 for the period in 2006.
Sirius reported double-digit revenue gains for its fiscal year and fourth quarter and reduced losses for both periods.
Total revenue for its fiscal year, ended Dec. 31, 2007, increased to $922.1 million, up 45 percent from 2006 total revenue of $637.2 million. Fourth-quarter 2007 total revenue increased 29 percent to $249.8 million from fourth-quarter 2006 revenue of $193.4 million.
Sirius reported a net loss of $565.3 million for 2007, an improvement of 49 percent over the 2006 net loss of $1.1 billion. For the fourth quarter 2007 the net loss was $166.2 million, as compared with the fourth-quarter 2006 net loss of $245.6 million. — Additional reporting by Steve Smith