Sirius Sags on Guidance

Updated from 7:30 a.m.

Sirius Satellite Radio (SIRI) sank 7% early Tuesday after the satellite radio broadcaster warned of soft holiday season sales.

Late Monday, Sirius cut its year-end subscriber guidance, citing lower-than-anticipated sales since the Thanksgiving weekend. The news came as a shock to Sirius fans, who recently have taken to gloating at the slowdown at rival XM (XMSR).

Sirius' warning raises the prospect that the industry's growth has plateaued and that both companies could be in for less-impressive gains on their user rolls. XM has repeatedly trimmed its subscriber forecasts this year as Sirius has been taking the lion's share of new satellite radio customers.

But Sirius' run ended late Monday, when the New York-based company said that it now expects 5.9 million to 6.1 million subscribers by the end of 2006. That's below a forecast of 6.3 million subscribers that the company gave Nov. 8.

Last year, Sirius said, the imminent addition of Howard Stern to the company's roster helped add 500,000 subscribers in the last 10 days of the year, representing nearly 25% of the year's net additions and "clearly demonstrating the dramatic pace of holiday sales."

Sirius said the low end of the new guidance for 2006 would still result in subscriber growth of 20% for the year.

The company said the forecast range represents total net subscriber additions of about 2.6 million to 2.8 million in 2006, or year-over-year subscriber growth of approximately 80% to 85%.

Sirius reiterated that its first quarter of positive free cash flow, after capital expenditures, may be reached as early as this quarter.

Early Tuesday, Sirius fell 32 cents to $3.85 and XM tumbled 62 cents to $13.99.

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