XM losses narrow in second quarter

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XM Satellite Radio narrowed its quarterly losses, the company said Thursday, as the hefty number of subscribers coming from new-car sales offset the lackluster amount of consumers who bought at stores.

The company added 942,000 gross subscribers, or 338,000 net, in the second quarter for a total 8.25 million, up from 6.9 million in the same quarter a year ago. Rival Sirius Satellite Radio, which is trying to merge with XM, had 6.6 million subscribers at last count.

XM said its net loss in the quarter was $175.7 million, down for a loss of $229.1 million in the year-ago frame. On a per-share basis, and not including a 12-cent charge related to its investment in Canadian Satellite Radio, XM lost 45 cents, a penny worse than analysts had expected.

Revenue rose 22% to $277 million, about $2 million more than analysts had predicted.

Shares of XM sunk 8% to $11.13 on Thursday, making it the fourth worst performer on The Hollywood Reporter Showbiz 50 stock index. Sirius shares were off 6% Thursday to $2.91.

XM's earnings report comes two days after CEO Hugh Panero said he'd step down on Aug. 10 to be replaced on an interim basis by COO Nate Davis. If XM and Sirius merge -- which the companies hope will happen by year's end -- Sirius CEO Mel Karmazin will have that role at the combined company.

Analysts seemed lukewarm about XM's results, though many presume that investors are more concerned with the prospects of a merger approval than they are with quarterly numbers. Observers put the odds of getting federal regulators to approve a merger at roughly 50-50.

"Our concern is that implied deal probability might be too high," said Bank of America analyst Jonathan Jacoby, who reiterated his "neutral" rating on the stock and $12.50 price target.

Jacoby also expressed concern that churn has exceeded 2% at XM for five consecutive quarters, "despite management's efforts to bring it down to a normal level."
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