Sirius XM raises subscriber forecast, shares gain

NEW YORK Tue Aug 2, 2011 12:04pm EDT

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NEW YORK (Reuters) - Sirius XM Radio (SIRI.O) spent less to attract new listeners in the second quarter and raised its forecast for subscriber additions for the year, sending its shares up 1.4 percent on Tuesday.

The company, home to programing by Howard Stern and Major League Baseball, said it expects to add 1.6 million subscribers this year, up from a previous forecast of 1.4 million.

The company also raised its free cash flow forecast for the year to $400 million from $350 million.

The new subscriber forecast came as a surprise to Gabelli & Co analyst Brett Harriss, who said he was expecting the company to be more conservative, considering inventory problems in Japan facing the auto industry.

Sirius XM depends on the car industry to attract new subscribers. About half of car owners who receive free radios in their new vehicles end up paying for the service once the promotions end.

"Despite a slowdown in auto sales due to Fukushima, (Sirius XM's) business is strong," Harriss said.

On Tuesday, Toyota Motor Corp (7203.T) said supply chain disruptions related to the earthquake in Japan were being resolved faster than expected.

Sirius XM, which has radios in the dashboards of 65 percent of new cars in the United States, stands to benefit this year and next as auto sales improve, Chief Executive Mel Karmazin said on a conference call. Its radios can now also be found in used cars.

"Again, we will continue to grow subscribers as the (car companies) are all forecasting higher auto sales in 2012," Karmazin said.

He told analysts on the call that the company should make more money off each consumer in future quarters, now that the Federal Communications Commission has lifted a three-year ban on the company raising its prices. The FCC lifted the price freeze on Sirius XM last week.

Sirius XM most likely will raise prices on its popular $12.95-per-month package, said Lazard Capital Markets analyst Barton Crockett.

"Investors do expect a meaningful price hike next year," Crockett said, adding that prices will probably rise by $2 per month, not as much as Netflix's much-publicized price increase.

In the second quarter, the satellite radio provider added a better-than-expected 452,147 subscribers, bringing its total listener base to more than 21 million. Maxim Group research was expecting it to add 391,000 subscribers in the quarter.

The company spent $54 to acquire each new subscriber, $5 less than a year earlier -- a sign that it is managing costs better.

Second-quarter net income was $173 million, or 3 cents per share, beating analysts' average forecast of 2 cents per share, according to Thomson Reuters I/B/E/S.

The company's shares were up 1.4 percent to $2.14 in midday trading on Tuesday. The shares are up 32 percent this year.

(Reporting by Liana B. Baker; Editing by Lisa Von Ahn and John Wallace)

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