XM Satellite Cuts
Full-Year Targets
For Revenue, Users
By
ELLEN SHENG
May 25, 2006
XM Satellite Radio Holdings Inc. lowered its forecasts for full-year subscriber growth and revenue, citing soft retail sales of satellite radios in the second quarter.
Shares of the Washington, D.C., company, which competes with
Sirius Satellite Radio Inc. in selling radio service delivered by satellite, were down $1.76, or 11%, to $13.75 in 4 p.m. Nasdaq Stock Market composite trading. The shares already had dropped almost 45% this year.
XM Satellite expects to end the year with 8.5 million subscribers, down from a previous forecast of nine million. It lowered its revenue forecast to $835 million from $860 million.
XM struggled during the holiday season against Sirius, which launched a big marketing campaign centered around radio host Howard Stern, who started broadcasting exclusively on Sirius on Jan 6. In the past two quarters, Sirius's subscriber additions have outpaced XM's, even though Sirius has a smaller overall subscriber base. In the first quarter, XM added about 569,000 net new users, while Sirius added about 761,000. Bolstered by the subscriber trends, Sirius earlier this month raised its 2006 subscriber forecast to more than 6.2 million.
XM Chief Executive Hugh Panero said that even though XM has regained retail market share since earlier this year, "the satellite radio category has seen an overall softness" in retail sales.
A Sirius spokesman wasn't available to comment.
XM, like Sirius, has spent heavily in order to gain subscribers, which has made some investors nervous. Higher marketing costs have prompted several shareholder lawsuits alleging that Mr. Panero and other top executives sold off stock while misleading investors about the company's ability to control costs.
Yesterday's lowered outlook follows a string of negative announcements for XM in the last few months. The Recording Industry Association of America last week filed a lawsuit against XM, alleging that the company's portable player, the "Inno," should be subject to higher performance-rights fees because it can record and store music. The RIAA sued for $150,000 for each infringement, or a fee each time a song is recorded.
XM also is facing inquiries from the Federal Communications Commission and the Federal Trade Commission. The FCC found that one of XM's products didn't comply with transmission-codes standards, while the FTC questioned some of the company's marketing practices.