Sirius, XM Post Solid 1st-Quarter Results

By Amy Gilroy On May 19 2008 - 6:00am

Though weary of their long wait to merge, Sirius Satellite Radio and XM Satellite Radio reported solid first-quarter results with strong gains in subscribers, mainly from the OEM sector.

Patience in waiting for the Federal Communications Commission (FCC) to rule on the merger, announced 15 months ago, was a topic at conference calls held separately by each company.

CEO Mel Karmazin said, "We filed our application over 400 days ago and it's almost 350 days on the FCC's clock. The FCC historically tried to review deals within 180 days. We share the reasonable frustration that many of our investors feel."

Nate Davis, president/COO of XM, took the time to thank his managers for keeping their eye on day-to-day operations instead of being distracted the merger.

XM recorded double-digit gains in revenue and subscribers for the quarter ending March 31, but it posted a wider loss.

Revenue rose nearly 17 percent over the first quarter last year to $308 million, up from $264 million. Net loss was $129 million, compared with $122 million for the period last year. Subscribers gained 18 percent to 9.33 million, compared with 7.91 million subscribers at the end of first quarter 2007. This growth was driven by a 49 percent year-over-year increase in the number of gross additions through the automotive (OEM) channel, the company said. Retail sales, however, fell to a negative 51,000 (although 16,000 of those were simply reclassified now as "outsourced commercial subscribers). This is compared with a gain of 60,000 net new retail subscribers for the year-ago quarter.

Sirius reported double-digit revenue and subscriber increases and a double-digit reduction in its loss for the first quarter.

Revenue grew 33 percent to $270.4 million, compared with $204 million for the first quarter last year. Adjusted loss from operations improved 53 percent to $39.5 million.

Sirius ended first quarter 2008 with 8.64 million subscribers, up 31 percent from 6.58 million subscribers at the end of first quarter 2007. A total of 322,534 net new subscribers were added during the quarter. Retail subscribers increased 10 percent to 4.64 million and OEM subscribers increased 72 percent to 3.98 million over the same period a year ago.

Net loss was trimmed to $104 million, compared with $145 million for the same quarter last year.

Karmazin conceded that the merger delay is negatively impacting retail sales.

The merger is not impacting sales at the OEM level, Karmazin said. — Additional reporting by Steve Smith

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