Revenue, cash flow soar for Sirius' Q4


As government regulators begin to ponder a Sirius Satellite Radio merger with its competitor, the company posted its first ever quarter of positive free cash flow Tuesday.

Sirius, led by CEO Mel Karmazin, said it recorded a $245.6 million loss in the fourth quarter, down from a $311.4 million loss a year ago. Revenue surged 142% to $193.4 million, and free cash flow was $30.4 million.

The results bested the forecasts of analysts, though the company projected what some considered a weak outlook and shares fell. Sirius shares outpaced the broader markets, which tumbled Tuesday after China's stock market suffered its worst day in a decade.

Sirius ended 2006 with 6 million subscribers, an 82% improvement from the 3.3 million it had at the end of 2005.

But analysts weren't impressed with the company's year-end projection of "more than 8 million" subscribers, and Sirius also said that average monthly subscriber churn could rise as high as 2.4% from 2% in the fourth quarter.

"Sirius' 2007 targets imply lower sub and financial estimates than the current consensus and will likely pressure the stock," Goldman Sachs analyst Mark Wienkes said.

Karmazin said: "We look forward to another year of strong growth in 2007, anticipating that we will approach $1 billion in total revenue."

Sirius and XM Satellite Radio plan to merge this year, though analysts said the chances of them getting the go-ahead from regulators is less than 50%.

The House Antitrust Task Force set a hearing about the merger proposal for today. Some House members already have expressed concern that a merger could lead to higher prices charged to consumers. The merger must also be approved by the FCC.

Today's hearing, said Wedbush Morgan Securities analyst William Kidd, "should shed some important detail on how Capitol Hill is receiving the merger."