XM Shrugs Off Slowdown

XM's (XMSR Quote - Cramer on XMSR - Stock Picks) losses narrowed in the first quarter, but subscriber gains again fell well below expectations.

The Washington, D.C., satellite radio shop added 285,176 net new subscribers in the quarter ended in March. That's just half the 569,000 new users added in the year-ago quarter. Analysts had been at looking for the new subscriber gains to be in the 325,000 to 350,000 range.

Despite the sluggish growth pace, XM reiterated its subscriber goal of about 9.1 million users by the end of 2007. XM had originally expected to hit the 9 million mark last year.

The adjusted net loss for the quarter was $122 million, which compares with $149 million in the year-ago. The 40-cent-a-share pro forma loss was a penny better than analysts' estimates, according to Reuters Research.

Sales for the quarter were $264 million, up from $208 million for the year-ago period and in line with expectations.

Looking ahead, XM says revenue for the year should be around $1 billion; analysts were looking for $1.14 billion in sales for 2007. XM did reiterate that it will reach positive cash flow generation in 2008.

Other measures did not improve for XM, including the monthly customer defection rate, or churn, which increased to 1.78% from 1.64% last year. And the conversion rate of customers buying the service after a free trial fell to 51% from 54% a year ago.