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XM’s Davis Talks Merger, New Strategies

Washington — XM Satellite Radio president/CEO Nate Davis told analysts today he hopes today’s quarterly earnings announcement will be the last that XM will hold as a stand-alone company.

Acknowledging the protracted merger process that has dragged on since Sirius and XM announced their plans to merge in February 2007, Davis thanked his managers for their continued focus on the day-to-day operations of XM in improving churn and other financial metrics.

Davis outlined a satellite radio strategy that is moving from sales of plug-and-play radios to OEM and wireless-product sales.

He added that XM is especially pleased with gains in net new subscribers from new car sales that surged 58 percent to 355,000, up from 225,000 over the period last year. He said OEM subscriber gains should continue, even while auto sales are expected to be the weakest this year than in over a decade.   Currently four out of 10 customers of XM’s auto partners drive off the lot with a factory XM radio, but by model year 2010, that figure should increase to seven out of 10. 

Davis noted that XM wireless subscribers are also growing and that the company’s subscribers through AT&T and Altel more than doubled during the quarter, when compared with the period a year ago. XM also announced a partnership with BlackBerry during the first quarter.

The gains in OEM subscribers offset a decline in retail sales, said the company. Net new retail subscribers fell to a negative 51,000 for the quarter (although 16,000 of those lost subscribers 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.

The company also said that more car companies are adopting XM’s NavTraffic real-time traffic service that will be available in more than 40 model vehicles in the 2009 model year.