Sirius XM Radio Second-Quarter Profit, Subs Jump

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NEW YORK - Sirius XM Radio on Tuesday reported a stronger second-quarter profit amid higher revenue and lower loss on debt extinguishment. The company also boosted its full-year subscriber growth target, once again signaled that it will raise its prices in 2012 and said it will also explore shareholder rewards, particularly stock buybacks, next year.

But management during a conference call didn't comment on the status of a legal dispute with Sirius star Howard Stern who earlier this year filed a lawsuit accusing the company of stiffing him on stock options.

The satellite radio company's quarterly profit of $173.3 million exceeded Wall Street expectations and compared with a profit of $15.3 million in the year-ago period. Revenue rose 6 percent to $744 million.

Sirius also said it added 452,147 net subscribers in the second quarter to end it with a total user base of slightly more than 21 million - an all-time high for the firm.

Based on its results, the company raised its full-year guidance, pushing its 2011 subscriber growth target up by 200,000 to 1.6 million. The firm had ended 2010 with about 20.2 million subscribers.

"With the excellent subscriber performance recorded in the first half of 2011, we are now confident that we will exceed our previously announced 1.4 million net subscriber addition guidance for 2011," president and CEO Mel Karmazin said in a statement. On a conference call, he highlighted that Sirius subscriber growth has actually been accelerating in "a very competitive market and a weak economy," showing that customers see real value in the firm's services.

Management on the call also said that the full impact on car sales from the earthquake in Japan is still not clear and that the U.S. economy remains sluggish, but Karmazin predicted more subscriber gains in 2012, accelerated revenue growth and better profit margins.

"We intend to drive future growth through innovations to our satellite and internet platforms, with the goal of better delivering our unparalleled content to our valued customers," he said. "We're also excited to launch a variety of additional new music and talk channels later this year."

Late last week, Sirius received a regulatory order that ensures the end of pricing restrictions the company has seen since the merger of Sirius and XM. Karmazin said the inability to increase prices despite an expanded content lineup has kept a lid on revenue and average revenue per user and signaled an early 2012 increase in the firm's base price.

Making his case, he said the company currently offers the "strongest content lineup ever" for satellite radio, but also highlighted that Sirius thanks to merger synergies this year has lower overall programming costs than last year. In a reference to other entertainment industry players, Karmazin pointed out that cable and satellite TV companies can not report such positive trends.

"Generally, when you raise prices that you tend to dampen demand," argued Sirius CFO David Frear. "We think that price increases make a lot of sense, given the programming we're delivering and given how long we've left the price unchanged."
 

Email: Georg.Szalai@thr.com

Twitter: @georgszalai

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