Washington - XM Satellite Radio today noted it was disappointed that it missed by a slim margin its forecast of hitting six million subscribers by the end of 2005, which it blamed on slower than expected new car sales in the fourth quarter.
XM reported it had a total of 5.933 million subscribers, said executive VP and CFO Joe Euteneuer, and remains on track to surpass nine million subscribers by the end of the year and to hit 20 million by the year 2010.
XM president and CEO Hugh Panero stated than OEM sales are starting to rebound. “Now in the first quarter were seeing GM coming back stronger. They’ve taken the Tahoe and other key products and are emphasizing fuel efficiency and I think that will help.”
New car sales will play a significant role in new subscribers for the years 2007 and beyond, XM said, with factory-installs hitting 5 million vehicles in calendar 2008. The company said GM has produced 3.5 million cars with XM and is on track to produce 1.5 million more in 2006.
XM reported that 2005 new OEM XM subscribers hit 964, 000, up 20 percent over 2004, but OEM subscribers for the fourth quarter 2005 fell to 114,000, down from 220,000 for the quarter in 2004. Net new retail subscribers hit 1.723 million for 2005, up 63 percent over the year earlier and 782,000 for the quarter, XM said.
In retail sales, XM said as the service becomes more mainstream, its growth is moving from the superstores such as Best Buy and Circuit City into more general merchandise outlets such as Wal-Mart, Sam’s Club, Target and Staples.
At the earnings conference today, XM also responded to the recent resignation of board member Pierce Roberts, which was recently made public in a filing with the Securities Exchange Commission (SEC) and resulted in XM shares tumbling this morning by 8,9 percent in pre-market trading, according to published reports. According to a letter to XM’s chairman filed with the SEC, Pierce stated he disagreed with the “current direction of the company” and warned of “a significant chance of a crisis on the horizon.”
XM acknowledged that it received a letter of resignation from Roberts on February 13.XM chairman Gary Parsons said that Pierce was concerned that XM was spending too heavily in order to achieve rapid growth.Parsons said, “Jack has expressed it for some time, while other board members supported more aggressive measures.Frankly, this is a balancing act that we take quite seriously.” Parsons added, “Based on the numbers for the fourth quarter we did grow strongly but we failed to do so as economically as we planned. In prior years, we grew strongly and economically. We feel we will return to those patterns.”
Parsons also noted, “We put together a board deigned to have a strong diversity of views… and in the long term, the diversity does build a stronger company.”