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Monday, November 06, 2006

XM, Put The Cork Back In The Champagne

XM Satellite Radio announce improved revenue and a smaller loss for the third quarter. Revenue rose 57% from the same quarter last year to $240 million. The company's operating loss narrowed from $110 million to $61 million.

Close, but no cigar.

XM still has $1.3 billion in long-term debt net of the current portion and total liabilities of $2.3 billion. And, the company only added a total of 282,000 net subscriptions during the period taking the total to 7.185 million. Profections by the company indicate that they may only hit 7.7 million subscribers by year-end. That means over the critical holiday season, net new subs may only total 500,000.

Taking away from the revenue improvement further, subscription acquisition costs rose to $60 per unit from $53 last year, and "cost of gross acquistion" rose to $93 from $89.

In sum, XM is a business with slowing growth and higher costs per customer acquired.

XM's stock jumped 16% on the news to $13.20, but still down from its 52-week high of $32. It took rival Sirius's stock up as well. With numbers like these, it should not go much higher.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
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