Scott Moritz

Return to Article

XM Rockets Past Subscriber Target

Scott Moritz

The Washington, D.C., pay radio service added 320,000 net new subscribers for the quarter ended yesterday, exceeding the 260,000-addition target that some analysts had set. XM now counts 1.68 million users and says it is on track to reach its goal of 2.8 million subscribers by year-end.

XM shares, which closed up 41 cents at $28.34 Thursday, jumped an added $2 in after-hours trading. Meanwhile, rival Sirius (SIRI) was unchanged in the postclose market after closing up 2% at $3.46.

XM recorded net subscriber additions of 430,580 during the fourth quarter, and analysts expected signups to drop more dramatically in the latest period from sparkling holiday-season levels. The company didn't provide any financial updates, but investors will be curious to see if the rapid first-quarter growth came at the expense of rising marketing and acquisition costs.

In January, broadcasting peer Sirius reported bulging subscriber wins but jacked up expenses tempered investors' enthusiasm a bit.

Both companies sell subscription radio programming that is broadcast from satellites to special receivers mounted in vehicles or homes.

Shares in Sirius and XM surged last year as investors leaped aboard the satellite radio bandwagon. The companies charge $10 and up for monthly subscriptions to their mostly commercial-free radio broadcasts.

Bulls believe the medium has nearly unlimited growth potential, and seize on the companies' fast-expanding subscriber rolls as evidence. But bears note these outfits' cash-consuming ways and wonder if the business can ever expand to the point where either company, let alone both, is consistently profitable.