Sirius Sidesteps Howard Stern Questions in Announcing Earnings


Sirius XM Radio (SIRI) may be on the verge of a comeback from the brink of financial oblivion, but for now it has nothing to say about the future of its biggest star, Howard Stern.

In a conference call following today's release of better-than-expected quarterly earnings, chief executive Mel Karmazin advised anyone wondering about Stern's contract to listen to Stern's show: His contract is one of the favorite topics of the self-anointed King of All Media. But the normally loquacious Karmazin declined to comment further on Stern.

Karmazin and Stern have known each other for years, which should help the two strong-willed men reach a deal. I believe Stern is not going anywhere. Besides, given Sirius' recent success, why would he want to terrestrial radio.

Beating Expectations, Disappointing Investors

The New York–based satellite-radio provider today reported a tiny fourth-quarter net income of $14.17 million, versus a loss of $245.08 million, or 8 cents per share. Revenue rose 6%, to $684 million. On an adjusted basis, pro forma adjusted income from operations of $115 million compared with $32 million a year earlier. Results were helped by a 7% reduction in expenses from the merger last year that created Sirius XM.

The earnings beat Wall Street expectations but failed to wow investors, who sent shares of Sirius down in early trading. Perhaps traders were hoping for good news about the contract of Stern, who brought millions of subscribers with him when he joined the pay-radio company. In 2007, Stern received an $83 million stock bonus on top of his $500 million pay package. His broadcast show moved to Sirius in 2006.

'Very Encouraging'

Karmazin spared no superlative in describing his company's financial performance. "2009 was a notable year of firsts for Sirius XM," he said in a press release. "The first full year of positive pro forma adjusted income from operations, and the first full year of positive free cash flow in the company's history. We demonstrated considerable operating momentum in the fourth quarter – the addition of over 250,000 subscribers, ARPU [average revenue per subscriber] growth, revenue growth, improved SAC [subscriber acquisition costs], and continued operating cost reductions."

Sirius expects full-year revenue of more than $2.7 billion this year and expects free cash flow to remain positive. The company anticipates adding more than 500,000 net subscribers, beating the record high of 19 million at the end of 2008. Adjusted income from operations will rise about 20%, to $550 million.

Shares of Sirius have soared more than 714% over the past year, as the company avoided bankruptcy in the face of weak auto sales.
"This is very encouraging, especially the guidance," Wunderlich Securities analyst Matthew Harrigan told Reuters. "They are very sensitive to the automotive industry, but certainly the confidence that they can add 500,000 customers is a good thing." When a deal with Stern is announced, that number could go higher.