XM Satellite (XMSR) boosted its year-end subscriber target Tuesday, as cheap radios crank up the sales growth.
The Washington, D.C.-based pay radio shop says it has exceeded the 5-million-subscriber level and now expects to have more than 6 million users by the end of the year. XM's prior goal was 5.5 million subscribers.
With the price of its Roady II radio cut to $49, XM has been able to take a larger cut of the retail business from rival
. August sales data show that XM captured 55% of the market, according to a report by Stifel Nicolaus analyst Kit Spring.
XM has now outsold sole rival Sirius for the past three months in the retail market, according to Spring.
But while radio price wars have juiced sales for XM, cuts as deep as 50% have taken a toll on some retailers and distributors. Consumer electronics supplier
, for example, warned Tuesday that because of the steep drop in satellite radio prices and slumping sales, the company's revenue will be 9% below fiscal third-quarter expectations.
For the quarter ended last month, Audiovox says it will take a $3.7 million charge for an inventory writedown and report a net loss of about 17 cents a share. Analysts were looking for a profit of 7 cents a share.
With about a one-year jump on Sirius, XM has about twice as many subscribers as its rival. The gap had started to close earlier this summer before XM started its aggressive promotions. Last month, Sirius raised its year-end goal to 3 million users from the 2.7 million previously projected. The company said last week that it had 2.07 million users as of Sept. 15.
Investors have been drawn the to the booming two-player subscription radio sector on hopes that the service will succeed as a mass-market offering. The rapid growth has helped keep attention away from the high costs and massive losses the two companies have tallied up.
Analysts and investors expect a brisk holiday season, despite slower auto sales, as satellite radio prices remain low and gift purchases seem ready to rise.
"With the winning combination of outstanding new channels and breakthrough products in advance of the holiday season, XM is poised for record growth during the fourth quarter," CEO Hugh Panero said in a press release Tuesday.
Audiovox shares dropped 20% in early trading Tuesday, falling $3.37 to $13.27. Meanwhile, XM shares were up 28 cents to $33.97 and Sirius was down 4 cents to $6.59.