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Satellite Radio -- You Can't Be Sirius?

NEW YORK (TheStreet) -- Sirius XM Radio (SIRI) finally posted a profit.

Sort of. Its third-quarter net loss was $149 million, or 4 cents a share. Adjusting for non-recurring items, the New York-based satellite-radio broadcaster's loss was $11 million, which amounts to break-even on a per-share basis. Analysts expected a loss of 2 cents a share.

Pro-forma operating profit was $106 million, compared with a loss of $37 million a year earlier. Revenue growth beat analysts' expectations. A total of 102,000 subscribers were added by the end of September. The shares rose in after-market trading. Sirius, which acquired rival XM Satellite Radio in July 2008, appears to be righting its ship.

Still, investors should steer clear of Sirius' stock as the company has a long way to go before it can post sustainable earnings.

Sirius' stock has fallen nearly hand in hand with retained earnings over the past three years. The company is in the hole for more than $10 billion and living off debt. The stock drop -- 84% during the past three years -- is the direct result of past performance. While that trend may (or may not) be turning around, the ravages to the company's financial statements won't be undone quickly.

Sirius took steps to hold its own financially by refinancing at lower interest rates and pushing its earliest refinancing need to 2011. But the debt load is overwhelming, and the threat of a massively dilutive Liberty Media equity conversion should make stock holders quake.

Beyond burdensome financial matters, Sirius has challenges to its business model that make the future unclear.

One of the most important drivers for Sirius is auto sales. Most new satellite-radio subscribers are car buyers who get a free year. That most likely benefited Sirius during the third quarter due to the so-called cash-for-clunkers program, which spurred car sales. No mention of the program's effect was made in Sirius' earnings release but Ford (F), Honda (HMC), Toyota (TM) and almost all other major car manufacturers provide a Sirius or XM subscription option, so the program is sure to have boosted subscribership.

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