SIRIUS XM Radio Inc. (NASDAQ: SIRI) may have to take a breather after the satellite radio monopoly gave a mixed earnings report.  The company Reported Q1-2011 earnings of $0.01 EPS and revenues rose 9% to $723.8 million.  Thomson Reuters had estimates of $0.01 EPS and $736.3 million in revenues.

Net income was reported as $78.1 million, up from $41.5 million a year earlier.  Growth in subscribers is still coming as it added 373,064 subscribers in the first quarter and ended with 20.6 million subscribers.  One issue to consider is a slight drop in sales per subscriber.  Today’s report comes on the heels of a near-term high in short selling activity in SIRIUS shares.

There is one clarification that has been made about Japan. The company has said that slowing car sales due to supply chain disruptions in Japan will have an impact and will likely keep a lid on its subscriber growth in 2011. 

The company also issued in-line guidance for 2011, where it sees roughly $3.0 billion in revenues versus the Thomson Reuters estimate of $3.07 billion.  Mel Karmazin also telegraphed that 2011 self-pay churn and conversion rates are expected to be roughly the same as 2010.  The company continues to expect to add about 1.4 million subscribers in 2011. 

The one area that was raised is the free cash flow target, which is now $350 million for 2011 versus a prior target of about $300 million.Free cash flow in 2011 should approach $350 million as compared to previous guidance for free cash flow approaching $300 million.

When SIRIUS XM hit $2.00, we gave an outlook noting that a new base of shareholders would likely be needed to drive shares higher and higher.  This was a deep penny stock just two years ago and the 52-week trading range is $0.86 to $2.03.  Investors sold ahead of earnings yesterday as the stock slid to $1.91 from $1.99 after hitting a high of $2.03 yesterday.  We also saw a whopping 147 million shares trade hands.  The early indications have SIRIUS XM shares trading flat around $1.91 and we have seen a range of $1.90 to $1.92 in the last few minutes.

Investors are trying to find equilibrium here, and the only big surprise we got is that the sell-off from the $2.00 mark took longer than we would have expected.  We have only seen one analyst reaction so far, and that is from Gabelli maintaining its “Buy” stance despite at least some caution from the report.

JON C. OGG

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