SIRI: Siriusly In Need of the Merger

By William Trent, CFA of Stock Market Beat

• SIRIUS (SIRI) reported earnings:

  SIRIUS ended first quarter of 2007 with 6,581,045 subscribers, up 61% from 4,077,747 subscribers at the end of the year-ago quarter. During first quarter of 2007, SIRIUS added 556,490 net subscribers consisting of 192,978 from the retail channel and 364,674 from the OEM channel. In first quarter of 2007, SIRIUS captured 66% of satellite radio segment share, marking the sixth consecutive quarter for leadership.

  Total revenue for the first quarter of 2007 increased to $204.0 million, up 61% from $126.7 million for the year-ago quarter. Advertising revenue was $6.7 million during first quarter 2007 and average monthly revenue per subscriber (or “ARPU”) was $10.46. Average monthly subscriber churn was 2.3%, and was consistent with previously provided 2007 churn guidance. SAC per gross subscriber addition was $104 for the first quarter of 2007.

  SIRIUS reported a net loss of ($144.7) million, or ($0.10) per share for the first quarter of 2007, a 68% improvement from a net loss of ($458.5) million, or ($0.33) per share for the first quarter of 2006. The adjusted net loss for first quarter 2007 (adjusted to exclude stock-based compensation) improved to ($120.5) million, or ($0.08) per share, a 31% improvement from the adjusted net loss for first quarter 2006 of ($174.0) million, or ($0.13) per share. 2007

  OUTLOOK SIRIUS today reiterated the following guidance for the full year 2007:

  – Total revenue approaching $1 billion

  – More than 8 million subscribers at year-end

  – Average monthly subscriber churn of approximately 2.2 – 2.4%

  – SAC per gross subscriber addition of approximately $95

• Analysts were expecting the company to earn ($0.11) on $212 million in sales. For the full year, they expect $975 million in sales, whcih sounds like “approaching $1 billion” to us.

  Key for the company is completing the planned merger with rival XM Satellite radio. The two have been competing for unique content as well as for customers. After the merger is complete, these costs should be more tightly managed and perhaps allow the combined company to actually turn a profit.

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