vanguard
February 18th, 2006, 05:31 AM
.. Figures of Note:
.. Sirius cost to add a new subscriber: $ 139
.. XM cost to add a new subscriber: $ 89
.. Sirius quarterly Income (Revenue) $ 80 million
.. Sirius quarterly expenditures $ 377 million
The competition between XM and Sirius looks increasingly ruinous for both
companies at a financial level. The logic for some kind of accommodation or
peace treaty has never been stronger.... [Vanguard]
NEW YORK (Reuters) - Sirius Satellite Radio Inc. on Friday posted a wider
quarterly loss due to a surge in promotional costs for the holiday season in
the weeks before the launch of a new show by ribald radio host Howard Stern.
Despite Sirius's expanding subscriber base and rosy forecasts, its shares fell
almost 6 percent amid growing investor gloom about costs, after a director at
larger rival XM Satellite Radio Holding Inc. resigned on Thursday and warned
of a looming "crisis" if XM does not rein in spending.
Sirius, based in New York, posted a fourth-quarter net loss of $311.4 million,
or 23 cents a share, a penny more than the 22 cent loss expected by analysts,
according to Reuters Estimates. Last year, Sirius posted a loss of $261.9 million,
or 21 cents per share.
Revenue tripled to $80.0 million from $25.2 million, beating the $76.1 million fore-
cast by Reuters Estimates. Total costs rose to $377 million from $284 million.
Sirius said the cost of adding new subscribers, or subscriber acquisition costs, was
$113 per subscriber for the fourth quarter and $139 for the year, below its forecast
of $145 for 2005. By contrast, cost per user at XM, which launched its service one
year ahead of Sirius, was $89 in the quarter, though that was up 39 percent from
the previous year.
Sirius said it expects its subscriber acquisition costs to fall to about $110 per cus-
tomer in 2006, and drop further in 2007.
"They had a very solid report and gave guidance that looks extremely powerful,"
analyst Frederick Moran said. "Any weakness in Sirius is more related to concerns
at their rival XM as opposed to anything at Sirius itself. As long as the leader in
the industry's stock is falling it's going to pull its colleague down with it."
Shares of Sirius were down 4.6 percent to $5.39 in heavy volume. XM shares fell
as much as 10 percent to hit $21.65, their lowest lowest level since May 2004,
extending Wednesday's decline.
Both Sirius and XM are growing rapidly in the nascent market for satellite radio, but
losing money as they spend heavily on technology and programming, such as cel-
ebrity hosts, to win subscribers. The companies aim to attract long-term monthly
subscribers, who now pay subscription fees of about $13 a month.
Stern, who signed a five-year, $500 million deal with Sirius, started broadcasting in
January. Last week, XM signed Oprah Winfrey to program a channel under a 3-
year, $55 million deal.
SUBSCRIBERS SEEN DOUBLING THIS YEAR
Sirius said it ended 2005 with 3.3 million subscribers, after adding 1.1 million in the
fourth quarter. The gains outpaced the number of new subscribers racked up by
XM in the quarter.
Sirius said it expects its subscribers to nearly double this year to 6 million, and sees
an adjusted loss from operations of about $540 million in 2006, on revenue of $600
million. Revenue is seen climbing to $1 billion in 2007. By 2010, Sirius expects to
generate about $3 billion in revenue, and $1 billion in free cash flow, after capital
expenditures.
"The guidance (for 2010) was very positive for both long term subscriber trends and
for profitability; implying roughly 19 to 20 million subscribers," said Sanford Bernstein
analyst Craig Moffett. "This is likely to be significantly above consensus expectations,
and confirms our belief in the strong cash generation ability of the satellite radio plat-
form."
Sirius did not detail how many new subscribers it attributed to the addition of Stern's
programming. But Chief Executive Mel Karmazin said on a conference call that Stern
has had a positive pull on advertising dollars.
"Advertising revenue increased over 500 percent in 2005 to $6.1 million and we have
significantly more advertising commitments already on the books today than we had in
all of 2005," Karmazin said.
.. Sirius cost to add a new subscriber: $ 139
.. XM cost to add a new subscriber: $ 89
.. Sirius quarterly Income (Revenue) $ 80 million
.. Sirius quarterly expenditures $ 377 million
The competition between XM and Sirius looks increasingly ruinous for both
companies at a financial level. The logic for some kind of accommodation or
peace treaty has never been stronger.... [Vanguard]
NEW YORK (Reuters) - Sirius Satellite Radio Inc. on Friday posted a wider
quarterly loss due to a surge in promotional costs for the holiday season in
the weeks before the launch of a new show by ribald radio host Howard Stern.
Despite Sirius's expanding subscriber base and rosy forecasts, its shares fell
almost 6 percent amid growing investor gloom about costs, after a director at
larger rival XM Satellite Radio Holding Inc. resigned on Thursday and warned
of a looming "crisis" if XM does not rein in spending.
Sirius, based in New York, posted a fourth-quarter net loss of $311.4 million,
or 23 cents a share, a penny more than the 22 cent loss expected by analysts,
according to Reuters Estimates. Last year, Sirius posted a loss of $261.9 million,
or 21 cents per share.
Revenue tripled to $80.0 million from $25.2 million, beating the $76.1 million fore-
cast by Reuters Estimates. Total costs rose to $377 million from $284 million.
Sirius said the cost of adding new subscribers, or subscriber acquisition costs, was
$113 per subscriber for the fourth quarter and $139 for the year, below its forecast
of $145 for 2005. By contrast, cost per user at XM, which launched its service one
year ahead of Sirius, was $89 in the quarter, though that was up 39 percent from
the previous year.
Sirius said it expects its subscriber acquisition costs to fall to about $110 per cus-
tomer in 2006, and drop further in 2007.
"They had a very solid report and gave guidance that looks extremely powerful,"
analyst Frederick Moran said. "Any weakness in Sirius is more related to concerns
at their rival XM as opposed to anything at Sirius itself. As long as the leader in
the industry's stock is falling it's going to pull its colleague down with it."
Shares of Sirius were down 4.6 percent to $5.39 in heavy volume. XM shares fell
as much as 10 percent to hit $21.65, their lowest lowest level since May 2004,
extending Wednesday's decline.
Both Sirius and XM are growing rapidly in the nascent market for satellite radio, but
losing money as they spend heavily on technology and programming, such as cel-
ebrity hosts, to win subscribers. The companies aim to attract long-term monthly
subscribers, who now pay subscription fees of about $13 a month.
Stern, who signed a five-year, $500 million deal with Sirius, started broadcasting in
January. Last week, XM signed Oprah Winfrey to program a channel under a 3-
year, $55 million deal.
SUBSCRIBERS SEEN DOUBLING THIS YEAR
Sirius said it ended 2005 with 3.3 million subscribers, after adding 1.1 million in the
fourth quarter. The gains outpaced the number of new subscribers racked up by
XM in the quarter.
Sirius said it expects its subscribers to nearly double this year to 6 million, and sees
an adjusted loss from operations of about $540 million in 2006, on revenue of $600
million. Revenue is seen climbing to $1 billion in 2007. By 2010, Sirius expects to
generate about $3 billion in revenue, and $1 billion in free cash flow, after capital
expenditures.
"The guidance (for 2010) was very positive for both long term subscriber trends and
for profitability; implying roughly 19 to 20 million subscribers," said Sanford Bernstein
analyst Craig Moffett. "This is likely to be significantly above consensus expectations,
and confirms our belief in the strong cash generation ability of the satellite radio plat-
form."
Sirius did not detail how many new subscribers it attributed to the addition of Stern's
programming. But Chief Executive Mel Karmazin said on a conference call that Stern
has had a positive pull on advertising dollars.
"Advertising revenue increased over 500 percent in 2005 to $6.1 million and we have
significantly more advertising commitments already on the books today than we had in
all of 2005," Karmazin said.