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Sirius Satellite Steps Into the Spotlight

XM's weak quarter puts Karmazin in the driver's seat.

Letting rival XM (XMSR) go first with its stinky fourth-quarter news already has Sirius (SIRI) smelling like a cash-burning rose.

Last week, Sirius, the New York pay-radio shop,

successfully jockeyed to release its earnings a day after archrival XM stunk the joint out with an anticipated poor performance. Not only were XM's losses steeper than expected and costs of adding new subscribers alarmingly high, cost conscious director Jack Roberts

abruptly quit, warning of a potential crisis ahead.

Unlike its rival, Sirius is enjoying a surge in popularity, thanks to Howard Stern's January debut. The hoopla, combined with the stumbles of its Washington, D.C., rival, no doubt allowed Sirius to trounce XM in radio sales in the fourth quarter.

Now, with XM suffering a mini-implosion, industry observers expect a little showboating from Sirius' CEO, the media showman Mel Karmazin -- at least while the XM stumble lasts.

Sirius, for example, has hinted that it may raise its monthly subscriber rate. Karmazin could justify the move by arguing that it has compelling programming, and the additional revenue could help soothe Wall Street's concerns and start to turn the tide of red ink in the satellite radio business.

Analysts expect Sirius to post a net loss of 22 cents a share on $75.4 million in revenue when the company reports before the opening bell Friday. Sirius may also give a projected time frame for when cash generated from sales starts to break even with costs. XM said it expected to reach so-called free-cash-flow break-even by the end of this year.

On a conference call with analysts, XM executives addressed the departure of director Roberts. Chairman Gary Parsons said Roberts was in favor of conserving cash at the expense of growth. "This is a balancing act for the board and management," says Parsons.

"Based on the numbers in the fourth quarter, we grew strongly but not economically," says Parsons, adding that he expected to grow "strongly and economically" in the future.

Parsons said Roberts contributed to a strong debate on strategy. "We put together a board specifically for a diversity of views," says Parsons. "It builds a stronger company."

Investors apparently didn't see much building going on Thursday. XM shares fell $1.49, or 6%, to $23.76, while Sirius was down 17 cents, or 3%, to $5.65.

To view Street Insight's video preview of Sirius, please click here