Sirius XM Radio's (SIRI.O) subscriber additions fell short of some expectations, sending shares of the satellite radio provider down as much as 8 percent on Tuesday.
Sirius XM, whose shares had rebounded later in the session, added 334,000 new subscribers in the third quarter. Lazard Capital Markets expected at least 355,000 new subscribers while the Maxim Group expected about 400,000 new subscribers.
The company also had a harder time getting customers to commit to its service once its promotions end. It acquires most of its new subscribers by offering free trials of its service when people buy new cars.
The conversion rate of trial subscribers who became full paying subscribers fell to 44.4 percent in the third quarter, down from 48.1 percent a year earlier.
"We see net subscriber growth as the most important metric for the stock and any noise there or in conversion rates, is likely a headwind today, despite other positives in the report," said Lazard analyst Barton Crockett.
The company did not increase its earnings outlook for the rest of the year or for 2012, when it will raise its prices for the first time in years. For 2012, the company expects revenue to rise 10 percent to $3.3 billion and its free cash flow to rise 75 percent to $700 million.
The company plans to increase the base price of its packages, Sirius and XM Select to $14.49 from $12.95 a month and will adjust other programing packages starting January 1.
The company is allowed to raise prices now that the Federal Communications Commission has lifted a three-year ban on the company following Sirius' merger with XM radio.
Chief Executive Mel Karmazin told analysts on the conference call that he has not heard of any backlash from consumers since the price raise was announced.
"We're very cautious when we are raising our price. We believe that we are being prudent," Karmazin said, adding he is not concerned that customers will defect to free Internet radio rivals.
"Next year is the big bet because they are going to raise prices. Everyone saw what happened to Netflix," said Maxim Group analyst John Tinker, referring to the online video service's customer defections following price increases this year."
But Karmazin, the CEO, downplayed the higher prices and said consumers will be able to accept the $1.50 or so increase. Karmazin referred to it as an additional 5 cents a day.
Sirius XM, which competes with free Internet radio services such as Pandora (P.N), said its net income rose to $104.1 million, or 2 cents per share, from $67.6 million, or 1 cent per share, a year earlier. This beat Wall Street's EPS estimate by a penny, according to Thomson Reuters I/B/E/S.
Revenue of $764 million was in line with analysts' estimates.
The company, home to programing by Howard Stern and sports programing such as Major League Baseball, had 21.3 million subscribers as of September 30.
Its shares were flat at $1.79 on the Nasdaq after trading as low as $1.65.
(Reporting by Liana B. Baker; Editing by Lisa Von Ahn and Derek Caney)