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XM posts wider loss, cuts subscriber forecast

XM Satellite Radio Holdings Inc. on Thursday reported a wider loss for its second quarter and again lowered its estimates for full-year subscriber counts.
/ Source: The Associated Press

XM Satellite Radio Holdings Inc. on Thursday reported a wider loss for its second quarter and again lowered its estimates for full-year subscriber counts. The company’s shares tumbled to a three-year low in early trading but quickly recovered.

XM, which is based in Washington, D.C., lost $231.7 million or 87 cents per share in the three months ending June 30, versus a loss of $148.8 million or 70 cents per share in the comparable period a year ago. The losses included $105 million in charges for restructuring debt and other non-operating items.

Revenue nearly doubled to $227.9 million from $125.4 million a year ago.

The company said it now expects to end the year with a customer base between 7.7 million and 8.2 million, and that it would refine that range at the end of the third quarter. The company cited “current marketplace dynamics” and regulatory uncertainty regarding certain of its radio models for the change.

XM had already lowered its full-year estimates in May, saying at the time that it expected to have 8.5 million subscribers at the end of 2006 down from its previous estimate of 9 million, blaming problems with product availability and soft retail sales.

The latest figures include $82.3 million in losses from restructuring its debt and other non-operating losses, the company said. Excluding non-operating items, the loss was equivalent to 48 cents per share, smaller than the 67 cents per share that analysts polled by Thomson Financial had been expecting.

On Monday, the company named one of its board members, Nate Davis, to the newly created position of president and chief operating officer. Davis, a former senior executive at XO Communications, Nextel and MCI, will remain on XM’s board, where he has served as a director since 1999.

Its gross cost for adding each new subscriber increased to $112 in the quarter, up from $98 in the same period a year ago. The company added 398,012 net subscribers in the period, ending the second quarter with 6.9 million subscribers, an increase of 56 percent over the year-ago period.

Even with the lower forecasts for subscriber growth, the company said in a statement that it still expects to turn a profit from operations in the fourth quarter and full year 2007, although its ability to do so “becomes challenging” at the lower end of the subscriber range.

Once a stock market darling, XM has lost its appeal to investors in recent months on a string of bad news announcements, including the abrupt departure of a director earlier this year over strategic differences with the company, the lowered subscriber forecasts and regulatory inquiries into some of its radio units and marketing practices.

XM has run into regulatory problems with some of its units that contain FM transmitters, which allow users to hear XM through standard car radios. Its competitor Sirius Satellite Radio Inc. has also had problems with its own units that contain FM transmitters.

Sirius’s stock is also down this year, but not as much as XM’s — about 41 percent from the beginning of the year, versus 62 percent for XM, before Thursday’s announcement.

Sirius, which has been gaining subscribers with the addition of shock jock Howard Stern at the beginning of the year, reports its quarterly earnings Aug. 1. Its shares fell 4 cents, or 1 percent, to $3.92 in early trading on the Nasdaq.

Both companies provide more than a hundred channels of radio for fees of about $13 a month, including dozens of channels of commercial-free music as well as talk, sports and news. The services require special receivers and are available nationwide.