XM Reports a Boost From New-Car Buyers

By Sam Diaz
Washington Post Staff Writer
Friday, April 27, 2007

XM Satellite Radio Holdings narrowed its first-quarter loss to $122 million and reported stronger subscription growth with the help of sales from receivers installed in new automobiles, the company said yesterday.

The District company is relying increasingly on sales of vehicles equipped with its satellite radios for subscription growth. XM said yesterday that it signed 10-year contract extensions with Honda and Toyota.

XM, which is seeking federal approval to merge with competitor Sirius Satellite Radio, has suffered huge losses as it seeks to expand its service while enduring the high cost of operating its 170-channel system.

Chief executive Hugh Panero cited the subscription growth as a sign that the company was working on its financial problems. XM reported yesterday that it had 7.9 million subscribers in the first quarter, compared with 6.5 million a year earlier.

"While one solid quarter does not make a trend, our first-quarter performance reflects the fact that we have moved decisively to address a number of business challenges, and those efforts have begun to yield results," Panero said.

XM's loss for the three months ended March 31 is an 18 percent improvement over its $149 million loss in the first quarter of 2006. Revenue rose 27 percent, to $264 million.

Jonathan A. Jacoby, a Banc of America Securities analyst, said in a report that he expects the number of new subscriptions from car buyers this year to surpass that from retail sales.

This year, new cars with factory-installed satellite radios should result in about 60 percent of new subscriptions, and 70 percent by 2010, Jacoby's report said.

Through trial subscriptions, new-car owners are given the chance to try the service. Subscribers can add a receiver to their accounts at a reduced rate.

"The retail market was always sort of a temporary bridge, in our view," to the more lucrative auto market for satellite radio, said Mark Wienkes, an analyst with Goldman Sachs.

© 2007 The Washington Post Company