November 4, 2010 / 8:08 PM / in 7 years

UPDATE 4-Sirius XM mum on Stern, beats estimates

* Profit, revenue beat analysts’ estimates

* Ended Q3 with 19.8 million subscribers

* Sales rise 15 percent

* Discussions continue with Stern - CEO

* Shares fall 6.4 percent (Adds analyst comments; updates share price)

By Liana B. Baker

NEW YORK, Nov 4 (Reuters) - Sirius XM Radio Inc (SIRI.O) posted a higher-than-expected quarterly profit as more customers than usual retained their satellite radio subscriptions after promotions ended, but its shares fell 6.4 percent on the lack of news about Howard Stern’s contract talks.

“We do not have any update today, other than to say discussions continue,” Chief Executive Mel Karmazin said during a conference call.

Shares of Sirius, one of the most traded stocks on the Nasdaq, fell 10 cents to close at $1.47.

Radio shock-jock Stern’s 5-year, $500 million contract with Sirius XM Radio expires in December and investors have expressed concern that subscribers would abandon the service if Stern were to move on. [ID:nN03137272]

“The fact they didn’t announce anything on Howard was a disappointment given how much the stock had run,” said John Tinker, a Maxim Group analyst.

Sirius shares had rallied about 16 percent since October 22 ahead of its quarterly results, analysts said.

CEO Karmazin called Stern a “great partner,” but said Sirius XM attracts subscribers “every day because of the content we have on our 130-plus channels” and not just because of Stern.

Karmazin emphasized that recovering auto sales would be a benefit to Sirius XM, which tallies many new subscriptions from buyers of new cars that have the radios installed.

On Wednesday, it was reported that U.S. auto sales rose 13 percent in October, the best month of the year, led by a 19 percent gain at Ford Motor Co (F.N). [ID:nN0398672]

SOLID RESULTS

Excluding items, the satellite radio company posted a third-quarter profit of 2 cents a share, which beat analysts’ estimates for the company to break even, according to Thomson Reuters I/B/E/S.

This is Sirius’ fourth straight quarter of profit as it steadily adds subscribers and distances itself from years of huge losses and questions about its business model. It said it had 19.8 million subscribers in the third quarter.

Net income was $67.6 million, up from a loss of $151.5 million a year earlier.

The company, which is also home to programming by Oprah Winfrey, earned total adjusted revenue of $722.5 million in the quarter, up 15 percent from a year ago, and beating analysts expectations of about $719 million.

Sirius XM spent less on acquiring subscribers during the quarter, which Lazard Capital Markets analyst Barton Crockett said provided a “huge upside surprise.”

The subscriber acquisition cost fell 14 percent to $59 from $69 last year.

“They spent a lot less on subscriber additions, which means they are making more money,” Crockett said.

Sirius XM has also shown it can get customers to commit to its service after its starter promotions end.

The conversion rate of trial subscribers who became full paying subscribers climbed to 48.1 percent in the third quarter of 2010, up from 46.2 percent a year earlier.

Sirius XM maintained its full-year revenue outlook of $2.8 billion, which was in line with analysts’ estimates. It also raised its full-year earnings before interest, taxes, depreciation and amortization, a measure of cash flow, to $600 million from $575 million. (Reporting by Liana B. Baker; Editing by Dave Zimmerman, Maureen Bavdek and Richard Chang)

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