Feb 16 2006
Good News / Bad News
Revenue more than doubled, and topped Wall Street expectations, but the cost of attracting additional subscribers also rose.
The Washington-based company posted a quarterly net loss of $268.3 million, or $1.22 a share, compared with a loss of $188.2 million, or 93 cents per share, a year earlier.
Analyst had expected a loss of 92 cents a share, according to Reuters Estimates.
Revenue more than doubled to $177.1 million, from $83.1 million, and exceeding Wall Street’s average expectation of $174 million.
XM said it added over 898,000 subscribers in the quarter and now has more than 6 million, and is on track to reach 20 million by 2010.
The subscriber acquisition cost rose to $89 in the period compared with $64 one year ago.
Both XM and rival Sirius Satellite Radio are growing rapidly in a nascent market, but losing money as they spend heavily on technology and entertainment such as celebrity hosts to win new subscribers. The companies aim to attract long-term users who will pay a monthly fee for years to come.
Well, that’s not half-bad, actually. More subscribers, but still losing money because the cost of getting them has grown. Fair enough. I don’t think anyone with any modicum of common sense expects either Sirius or XM to make money for years to come. I said as much months ago:
Very few startups turn a profit right away. It’s not unreasonable for it to take a long time for XM or Sirius to start turning a profit, considering the huge amount of money that needs to be invested to start the network, sign talent, syndicate other shows, build studios, hire staff, etc.
The only thing I see as a potential problem is the massive outlay for Stern, Bubba, and Stewart and how Sirius has to make that back somehow. XM has new radios coming out (which they probably subsidized somehow) and just signed Oprah Winfrey and a deal with the NHL that grants them exclusivity in 2 years.
Both companies are hemorrhaging money, and while they’re both entertaining, they’re going to have to start turning a profit soon or they’re going to be hemorrhaging shareholders as well. On the news, XM shares fell $2.23 (8.83% as of 9:45am EST) to $23.06. The earnings call is scheduled for 10:00am EST.
Sirius will announce their earnings on Friday. Their shares are down $0.10 (1.72% as of 9:45am EST) to $5.72.
February 16th, 2006 at 10:20 am
I am not sure you want that first “to” in the sentence… otherwise the stock fell a fair amount more than 1.72% ;).
February 16th, 2006 at 10:36 am
Whatever would I do without you, my friend?
February 16th, 2006 at 3:36 pm
Probably have a lot fewer grey hairs :).