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Sunday, March 15, 2009

sirius satellite radioGloomy Predictions Hurt Sirius Says CEO
Originally Posted at The Wall Street Journal

Sirius XM Satellite Radio Inc. Chief Executive Mel Karmazin blamed the company's poor fourth-quarter subscriber numbers in part on reports of the possibility, since averted, of the company's filing for bankruptcy and outlined plans for expanding its business despite the poor economy.

In a conference call with analysts, Mr. Karmazin said the "doom and gloom" reports on the company's financial position "had a tremendous impact on the consumer buying our product." Last month, Liberty Media Corp. took a 40% stake in Sirius and lent it more than $500 million in order to cover looming debt payments that Sirius was unlikely to be able to meet.

The company earlier this week reported its subscriber numbers grew by just 83,000 in the fourth quarter, compared with 1.1 million for a combined Sirius and XM the year before. Mr. Karmazin also blamed the bankruptcy of Circuit City Stores Inc., which he said had been a strong seller of satellite radios.

The company also elaborated on its efforts to tap into owners of Apple Inc.'s iPhone and iPod touch.

The application it is developing for those devices will be available in the second quarter and will allow these consumers to subscribe without buying a satellite radio, Mr. Karmazin said, but he didn't provide pricing details. Currently, consumers who don't want to buy a satellite radio can subscribe to an online-only option for $12.95 a month, the same that a regular subscriber pays.

Pushing applications for mobile phones implicitly acknowledges the wealth of competition the company faces. Already, some consumers skip regular radio in favor of streamed Internet stations in their cars, a phenomenon analysts say will grow in popularity as more mobile phones improve their Internet capabilities and specialized Internet radio companies like Slacker Inc. and Pandora Inc. find new ways to get onto dashboards. But Mr. Karmazin seemed upbeat.

"Our competition, especially terrestrial radio, is getting weaker, and we will capitalize on that," he said.

Declining car sales mean the company won't see as many subscribers as previously hoped for from auto lots, but the company said its increasing penetration rates on dashboards should help it bounce back once car sales do. The company said it was ramping up its efforts to reach second-hand car buyers, focusing on the certified-preowned programs most car companies offer.

Additionally, the recent near-miss with bankruptcy may have spooked many potential subscribers seeking the best rates, which require up-front payment for several months' service.

The company withdrew its previous guidance that it expected to close 2009 with 20.6 million subscribers. Sirius said it expects to end the year with over $300 million in adjusted operating profit, but declined to provide any further guidance.

In 2008, the combined Sirius and XM posted a $136.3 million adjusted operating loss. Cost cuts resulting from the merger between the two companies last year would account for a significant part of the improving operating profitability, Sirius executives said.

Sirius and Liberty have been discussing joint marketing opportunities between Sirius and Liberty's DirecTV subscribers. Those opportunities might include a package for DirecTV subscribers to get Sirius radio at reduced rates, Mr. Karmazin said.