XM Radio On Target To Lose a Quarter Of a Billion Dollars ($250,000,000) this Year...Way To Go Fellas

LOS ANGELES, April 23 Reuters reported that satellite radio broadcaster XM Satellite Radio Holdings Inc. on Tuesday posted a narrower than expected first-quarter net loss as costs to acquire new subscribers came in lower than anticipated and its subscriber base more than doubled.

Although the net loss tripled from a year earlier, the Washington company has reported encouraging demand for its service, which consists of 100 channels of partially commercial-free radio programming.

``Right now, while they're just in the process of validating that people want the product, customer demand is the most important thing for them,'' said Ladenburg Thalmann & Co. analyst John Stone.

XM said its net loss widened to $112.3 million from $36.9 million a year earlier. The loss applicable to common shareholders was $117.7 million, or $1.56 a share, compared with $42.7 million, or 80 cents a share.

The analysts' average loss estimate compiled by Thomson Financial/First Call was $1.63 per share, from a range of $1.57 to $1.74.

Revenues were $1.8 million. The company, which launched its product nationally last fall, generated no sales in the year-earlier period.

On a conference call, Chief Executive Hugh Panero said Wal-Mart Stores Inc. will begin offering the company's radios at 1,000 stores nationwide, bringing XM's retail presence to 6,000 outlets by the end of the second quarter.

XM shares were down 15 cents, or 1.2 percent, at $12.05 in midday Nasdaq trade after rising as much as 2.5 percent earlier in the session.

The company on April 1 had released its subscriber figures, which Ladenburg analyst Stone said was the information investors had been awaiting.

Panero said on the call that ``churn,'' or the rate of subscriber cancellations, was less than 1 percent per month.

The company's subscriber acquisition cost in the quarter was $123, below its expectation of $130 for the year. Panero said 70 percent of subscribers are prepaying on a quarterly basis, with 18 percent paying annually or semiannually.

XM AT WAL-MART

Wal-Mart will offer a number of models, including an add-in for existing car stereos made by Pioneer that Panero said will see a price drop to $199 from $249 on May 1. He said the price cut would be achieved without an increase in the subsidy XM pays to Pioneer per unit.

``Clearly I think this is a little bit sooner and a little bit bigger drop than people were expecting,'' Stone said.

Besides the retail outlets, XM has deals with a number of automakers to build its technology into their new cars.

The company said on the call that it expects a deal with General Motors Corp. to put 300,000 to 400,000 XM-ready cars on the road by fall 2003.

As of Monday's close the shares were down 32 percent for the year, compared with a 55 percent drop on the year for XM's only competitor, Sirius Satellite Radio Inc. Sirius has begun rolling out its product in select markets, with a national launch set for July 1.

``In the markets where both products are available, we have actually seen our sales rise,'' Panero said on the call.

XM also said it is still on track to end 2002 with 350,000 subscribers. For the year, it reiterated its forecast of revenue of $20 million and a loss of $275 million before interest, taxes, depreciation and amortization.