UPDATE 2-Sirius 4th-qtr net up, interim CEO sees no big changes

Tue Feb 5, 2013 11:30am EST

By Liana B. Baker

Feb 5 (Reuters) - Sirius XM Radio Inc posted higher quarterly profit and revenue on Tuesday and its interim chief executive told Wall Street not to expect big changes at the satellite radio provider under his leadership.

In January, Liberty Media Corp became its majority owner after regulators gave it the green light to take control of the satellite radio operator, ending a prolonged battle for control that led to the departure of the previous CEO late last year. Liberty has installed several new board members.

Jim Meyer, who was named interim CEO in December, addressed the recent changes at Sirius but said the company's goals will stay the same.

"The first question I usually get from investors is what should we expect from you and what's going to change at Sirius XM under your leadership? I can tell you that you will see a lot more of the same, with a focus on self-paid subscriber growth, and a very tight focus on costs," Meyer said.

Even as shares dipping 1 percent to $3.13, analysts said Meyer has done a good job in his debut.

"No one is (former CEO) Mel (Karmazin) but what really came across well is that he obviously understands the car business," said Maxim Group analyst John Tinker.

Karmazin helped rescue Sirius from the brink of bankruptcy and was also well known for his stints at CBS Corp and Viacom Inc.

Meyer, who arrived at Sirius in 2004, the same year as Karmazin, oversaw the relationships with the auto industry, which accounts for the bulk of revenue. Meyer expects the number of satellite-enabled vehicles to double in the next five years.

He said Sirius had made a foray into telematics, or automotive information services such as stolen vehicle tracking and roadside assistance. It signed a deal with Nissan Motor Co Ltd in the fall to provide the services. Meyer said Sirius plans to pursue similar agreements in the future.

For now, Maxim's Tinker said Meyer's prospects are looking good to become Sirius XM's permanent CEO. A special committee headed by Liberty CEO Greg Maffei may provide an update on its search for a permanent chief on Feb. 27, when it reports quarterly results.

Maffei has said the committee is considering Meyer for the top job as well as other candidates.

Lazard Capital Markets analyst Barton Crockett said Meyer "has to be the leading candidate to be the fulltime CEO."

RESULTS

Crockett said customer service and billing costs rose more than expected to $82.3 million in the quarter, which analysts said could explain why shares were trading lower.

The company added 529,000 net subscribers in the quarter, up from 374,000 a year ago. Its churn, or cancellation, rate improved to 1.8 percent from 2 percent in the third quarter. Its conversion rate, or the percent of promotional subscribers who become paying customers, was unchanged from a year ago at 44 percent.

Net income rose to $156.2 million, or 2 cents per share, in the quarter, from $71.3 million, or 1 cent, a year earlier. This matched analysts' estimates on average.

The New York-based company said total revenue rose 14 percent to $892.4 million. Analysts expected $898.65 million, according to Thomson Reuters I/B/E/S.

Sirius said it started a $2 billion share buyback program. In December, its board approved the long-awaited repurchase program and issued a special dividend, giving a big payout to its biggest shareholder, Liberty.

Sirius previously said it had added 2 million subscribers in 2012, bringing the total to 23.9 million.

The company previously announced its forecast for 2013. It expects to add 1.6 million self-pay net subscribers and generate revenue of $3.7 billion. It expects free cash flow of $900 million and adjusted earnings before interest, taxes, depreciation and amortization at $1.1 billion.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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