New York – Analysts expressed concern about yesterday’s earnings reports from XM Satellite Radio and Sirius Satellite Radio including the news that XM laid off 80 of its roughly 480 employees and that both companies reported heavy quarterly losses of $109 million and $108 million, respectively.
‘One would hope that Sirius’ sales would have picked up a little more than they did. Is it a nail in the coffin, no, but it a source for concern,’ said Ryan Jones, senior analyst for the Yankee Group, Boston, MA. Sirius yesterday reported subscriptions reached 11,821 at the end of the third quarter, ended September 30 and that hit 16,136 subscribers as of October 31.
Sirius CEO Joseph Clayton claimed that the subscription levels, ‘while I would like them to be higher’ are in line with the company’s revised forecasts of 30,000 to 40,000 subscriptions by the end of the year.
Jones said XM’s layoffs were also a point of concern. ‘They’ve been hitting their numbers so there’s something internally wrong with their business that they haven’t gotten right. Were they expecting different revenues from advertising?’
XM said the layoffs were due to the company’s entering a new business phase. ‘We are now entering a new phase of operation where areas that required personnel resources now require less. Our repeater program is an example. We have about 800 repeaters located in cities and those repeaters are built, so many of the folks involved are no longer needed,’ said a spokesman.
He continued, ‘After this reduction we have about 400 employees and no future reductions are planned.’
Solomon Smith Barney, NY, NY, said in a recent research report that the satellite companies losses were not necessarily a point of concern, but that XM’s failure to achieve new financing could become one.
The report noted that ‘Despite solid results, the company has not yet realized additional financing. As a result, we believe shares of XM are likely to be highly volatile until the financial issue is resolved. ‘
Sirius also announced today that its service will be available in certain Hertz rental cars in Florida and California beginning December 1, 2002. Sirius and Hertz will initially make available approximately 20,000 Sirius units for renters of the Ford Taurus, Windstar, Expedition, Explorer, Crown Victoria and Mercury Grand Marquis at airports in the two states. Renters can receive the service for $5 per day, Sirius said. Clayton said the agreement with Hertz is exclusive.
Sirius also responded, today, to a recent Reuter’s report which took note of Sirius’ bankruptcy contingency plan as stated in a recent 10Q filing with the SEC. Clayton pointed out that the bankruptcy contingency statement is a routine part of its 10Q filing, required in the event that its recent $1.2 billion recapitalization plan is not consummated. Clayton said that 75 percent of the bond holders have already approved the plan and he is 99.9 percent sure it will be finalized in the first quarter.
