Results Are a Sirius Disappointment for Satellite Radio Fans

Ill winds on Wall Street buffetted satellite radio player Sirius (SIRI Quote) Wednesday after the company posted a poor third-quarter performance.

Shares of the New York pay radio shop thrashed about as investors considered weaker-than-expected subscriber growth and sales numbers, along with oppressively high customer acquisition costs. Sirius shares, which have risen nearly sixfold over the last year as investors pile into its red-ink-stained growth story, were flat at $2.27 at midmorning in Nasdaq-leading volume of 75 million shares traded.

For its third quarter ended Sept. 30, Sirius posted a loss of $107 million, or 11 cents a share, on $4.3 million in revenue. That's about the same loss as in the second quarter on a near doubling in sales, and it compares with a year-ago loss of $119 million, or $1.56 a share, on sales of $17,000. Wall Street analysts had expected a loss of a dime on sales of $4.6 million.

Most startling to the company's many fans was a shortfall in Sirius' closely watched subscriber number, which is the favored barometer of investors trying to gauge the prospects of a service startup. Sirius added 44,000 subscribers during the quarter, for a total of about 150,000 subscribers, but observers had been looking for net additions of 60,000 or more.

By contrast, Sirius' sole rival, XM Satellite Radio (XMSR Quote), which is about a year ahead in its business plan, crossed the million-subscriber mark this week.

Sirius' paltry subscriber growth was even more disturbing in light of the company's high subscriber-acquisition costs. The company says it spent $522 for every subscriber it added last quarter. These costs typically cover subsidies for radios, sales incentives, installation costs and chips from its supplier, Agere (AGRa Quote).

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Analysts had expected the company to spend about half that much on subscriber acquisitions. They say Sirius management had guided for per-subscriber acquisition cost of around $150 by the end of the year.

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