By Lisa Johnston
New products on display at the American International Toy Fair, held in N
XM Satellite Radio revised its subscriber and financial guidance for 2006, predicting that it will end 2006 with 8.5 million subscribers vs. the 9 million forecast earlier.
As a result, the company expects subscriber revenues of $835 million, down from $860 million, but a lower EBITDA (earnings before interest, taxation and amortization) loss.
XM said however that it remains on track to reach positive cash flow from operations for the fourth quarter of 2006 and on an annual basis for 2007.
“Although XM has regained retail market share since the first of the year, the satellite radio category has seen an overall softness at retail during the second quarter to date, and we have been later than anticipated with broad availability of our new products,” said Hugh Panero, XM president/CEO.
XM noted that even with the revised guidance of 8.5 million subscribers, it would achieve a subscriber gain of 40 percent over the course of the year. Sirius said it is sticking to its recently upwardly revised forecast of reaching 6.2 million subscribers by the end of the year.
Speaking at the recent Morgan Stanley Annual Media and Communications Conference, here, an analyst noted that satellite radio as a category grew only 10 percent in April, according to just-released data from The NPD Group in Port Washington, N.Y.
Ross Rubin, NPD industry analysis director, said that for April, compared with the same month last year, XM's sales declined in dollars in retail sales by 46 percent while Sirius' sales grew by 35 percent. In units for April, XM's retail sales declined by 18 percent and sales by Sirius increased by 55 percent.
XM chairman Gary Parsons, also speaking at the conference, said XM has decided to pursue a cautious growth plan rather than chase sales at any cost.
“We know that throwing money to increase growth beyond its natural pace is not a good thing,” he said.
Parsons acknowledged that the retail sector has seen recent softness, but he expects those numbers to increase in the coming months. He noted the recent shipment delays in newer XM/MP3 player products, but said quantities are now filtering into stores, with greater numbers expected in the next few months. He said that the XM Passport that is due in 2007 — which is essentially a radio on a chip in the form of a card that can slide into home audio products, MP3 players and clock radios and convert them to XM receivers — will also boost sales. He said the XM Passport has been widely adopted by 25 to 30 manufacturers, including Onkyo, Pioneer, Yamaha and HK, which will offer it in future products.
OEM sales are expected to remain steady for the rest of the year and increase in the future with the increase in factory-installed products, said Parsons.
XM still expects to reach 20 million subscribers by 2010, he said.
Separately XM said it has ended its efforts to acquire WCS Wireless due to failure to secure government approval.
XM announced in July 2005 that it planned to buy WCS Wireless, whose principal assets are wireless spectrum licenses that include the top 15 to 20 metropolitan areas. As a further incentive, WCS's frequency bands are adjacent to XM's service. XM had indicated that the acquisition might help it expand into “multimedia subscription services including innovative video and data offerings.”
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