Sirius XM Shares Slump As Legal Woes Mount

Shares of Sirius XM (NASDAQ: SIRI) slumped more than 4% on Thursday after a federal judge ruled that the biggest U.S. satellite-radio broadcaster must face class-action claims in a lawsuit alleging antitrust violations. The Judge has set May 2 of this year as the start date for the trial. In a complaint filed in 2009,  subscribers to the radio networks allege that the Sirius-XM entity raised prices by as much as 40 percent after the combination in 2008, after promising lower prices.

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Stocks In Focus: BAC, XOMA, SIRI

Shares of Bank of America Corp (NYSE: BAC) dropped as much as 2% in Wednesday's pre-market trading after the company said that it needs to revise its plans to boost dividends in the second half of 2011 after regulators objected to the proposal. The bank said that it will continue to work with the Fed and plans to "seek permission for a modest increase in its common dividend for the second half of 2011, through the submission of a revised comprehensive capital plan."

After Tuesday's closing bell, XOMA Ltd. (NASDAQ: XOMA) announced that its Phase 2b trial of XOMA 052 in Type 2 diabetes patients did not achieve the primary endpoint of reduction in glycosylated hemoglobin, or HbA1c, after six monthly treatments with XOMA 052 compared to placebo. Shares of the company slumped more than 34% in Wednesday's pre-market trading.

Howard Stern on Tuesday sued Sirius XM Radio (NASDAQ: SIRI), alleging that the satellite-radio station failed to pay performance-based stock options. The suit, filed in New York State Supreme Court, alleges that Stern was entitled to stock grants based on subscriber levels for 2008 and 2009, but that they weren’t paid. 

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Sirius XM Radio Inc. (NASDAQ: SIRI): Q4 Earnings Preview 2010

SIRIUS XM Radio Inc. (NASDAQ: SIRI) is scheduled to release fourth-quarter earnings before the market open on Tuesday, February 15, 2011. Analysts, on average, expect the company to report earnings of breakeven per share on revenue of $739.18 million. In the year-ago period, the company reported earnings of breakeven per share on revenue of $676.17 million.

Sirius XM Radio Inc. provides satellite radio services in the United States and Canada. The company offers a programming lineup of approximately 135 channels of commercial-free music, sports, news, talk, entertainment, traffic, weather, and data services to 20 million subscribers in cars, trucks, boats and aircraft, and through a wide range of mobile devices. 

In the preceding third-quarter, the New York-based company's  net income was $67.6 million, or 1 cent a share, compared to a loss of $151.5 million, or 4 cents a share, in the year-ago quarter. Revenue increased to $717.5 million from $618.7 million. Adjusted revenue rose 15% to $722.5 million from $629.6 million in the same quarter last year. Analysts, on average, expected the company to report breakeven per share on revenue of $718.69 million. 

At its last earnings call in November, the company said that it now anticipates full-year 2010 adjusted EBITDA of approximately $600 million versus previous guidance of approximately $575 million. The company now expects adjusted revenue for 2010 will exceed $2.8 billion and free cash flow will exceed $150 million. The company also projected that its year-end subscriber base will be approximately 20.1 million. 

Late in November, Sirius XM announced that it surpassed 20 million subscribers, a record number of subscribers in satellite radio history. Mel Karmazin, SIRIUS XM's Chief Executive Officer, stated, "Reaching and surpassing 20 million subscribers is a significant milestone for us. We have added the last 10 million subscribers faster than the first 10 million -- despite a tremendously competitive environment -- representing a strong endorsement of our service and our programming by discerning consumers who want and demand the best in audio entertainment. As a leader in audio entertainment, SIRIUS XM has assembled the best content, personalities, and entertainers that satisfy our subscribers' diverse interests."

Also in November, Sirius XM  and The National Football League announced a five-year extension of their satellite broadcasting and marketing agreement. SIRIUS XM, the Official Satellite Radio Partner of the NFL since 2004, will continue to broadcast every NFL game live nationwide from the preseason through the Super Bowl in 2016 as well as SIRIUS NFL Radio, channel 124, the first and only 24/7 radio channel dedicated entirely to the NFL.

In December, Star radio host Howard Stern signed a new five-year deal with Sirius XM, in a deal that includes distribution to mobile devices for the first time. In a statement, Stern noted that the company’s subscriber rolls have swollen to 20 million from the 600,000 who had signed up by 2006, when he began work for the satellite radio provider. There had been speculation that Stern might return to CBS (NYSE: CBS)  Radio, where he held court in morning drive time for more than 20 years.

In December, BMW Motorcycles announced that beginning with January 2011 production, BMW Motorcycles will offer SIRIUS as standard equipment on new radio-equipped Model Year 2011 R 1200 RT, K 1600 GT, and K 1600 GTL Touring Motorcycles. BMW Motorcycle will include an introductory one-year subscription to the "SIRIUS Everything" package with the purchase of every new radio-equipped RT, GT and GTL Touring Motorcycles produced from January 2011. After the introductory one-year subscription, the SIRIUS service will be subject to the standard rates. 

Also in December, Standard & Poor's raised the corporate credit rating on Sirius XM to BB- from B+ on improved operations. The outlook is stable. "The action reflects the company's improving operating performance, declining debt leverage, and the prospects for continued improvement in credit measures for full-year 2010 and 2011," said Hal Diamond, an S&P credit analyst, in a statement.

Last month,  Manchester United Football Club, and Sirus XM reported a multi-year agreement to make SiriusXM the official U.S. radio broadcaster of Manchester United. Sirius and XM subscribers would have access to live play-by-play of every Manchester United English Premier League match and would hear the official Manchester United club broadcast. The agreement also gives SiriusXM the rights to stream Manchester United Premier League matches to Sirius and XM subscribers online at www.sirius.com and www.xmradio.com and through website access via the SiriusXM App. In addition to SiriusXM's expansive play-by-play coverage of Manchester United, fans can also hear comprehensive soccer talk on SiriusXM's The Football Show, the daily talk program hosted by striker Giorgio Chinaglia and soccer expert Charlie Stillitano.

The future of radio such as SIRIUS XM Radio Inc. and CBS Corporation looks much brighter now that the FCC's latest net neutrality ruling has limited the viability of unlimited free radio over wireless internet, helping out pre-existing broadcast radio companies by eliminating the potentially harmful competition. The FCC has allowed companies to charge fees for services that consume large amounts of bandwidth, like radio over the internet would. This is a big victory for subscription radio companies because it will ensure they do not cede a large portion of their market share. 

One area in particular where this will benefit the Broadcast Radio sector is in the new car market where automakers were beginning to add Wi-Fi to their new cars. In response to the potential loss, subscription radio services had begun making deals with manufacturers to offer free trial-subscriptions to their service each time a new car is purchased. Much of Sirius XM's subscriber growth comes from buyers of new cars that have the radios installed. Nearly half of the trial customers become full-paying subscribers after their promotions end.

Another growth area radio companies are working to take advantage is the smartphone market. Companies are lobbying hard to get their broadcast chips installed in new models, allowing consumers to access the radio through their phone. The actions in the car and smartphone market are both key signs that the radio sector is looking for ways to survive in the new secularly shifting market environment.

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Sirius XM Radio (NASDAQ: SIRI): Q3 Earnings Preview 2010

Sirius XM Radio Inc. (NASDAQ: SIRI) is scheduled to release its third quarter earnings before the opening bell on Thursday, November 4, 2010. Analysts, on average, expect the company to report breakeven per share on revenue of $718.69 million. In the year ago quarter, the company reported breakeven per share on revenue of $629.61 million. 

Sirius XM Radio Inc. provides satellite radio services in the United States and Canada. The company offers a programming lineup of approximately 135 channels of commercial-free music, sports, news, talk, entertainment, traffic, weather, and data services to 19.9 million subscribers in cars, trucks, boats and aircraft, and through a wide range of mobile devices. 

In the preceding second-quarter, the New York-based company's net income was $15.3 million or breakeven per share, compared to a loss of $159.6 million or 4 cents a share in the year-ago period. Revenue climbed to $700 million from $591 million in the same quarter last year. Adjusted revenue increased 16% to $705.6 million. Analysts, on average, expected the company to report breakeven per share on revenue of $689.36 million. 

At its last earnings call in August, the company raised its revenue guidance for the full year 2010. The company now anticipates adjusted revenue to approach $2.8 billion. Previously, the company expected pro forma revenue to be about $2.75 billion. 

Recently, the company announced that it added 334,727 net subscribers in the third quarter of 2010, compared to a net subscriber gain of 102,295 in the third quarter of 2009. In the first three quarters of this year, Sirius XM added 1,089,417 net subscribers compared to a loss of 488,126 net subscribers in the first three quarters of 2009. The company ended the third quarter with a record-high 19,862,175 subscribers, an increase of more than 1.3 million subscribers from September 30, 2009. Self-pay churn improved to 1.9% for the third quarter of 2010 from 2.0% for the third quarter of 2009; andThe conversion rate from a trial subscription included in the sale of a vehicle to a self-pay subscription improved in the third quarter of 2010 to 48.1%, up from 46.2% for the third quarter of 2009. The company expects to end the year with approximately 20.1 million subscribers, implying net additions of approximately 1.3 million in 2010.

Last month, Karmazin expressed optimism that Sirius XM would be able to renew its deal with Howard Stern. The shock jock' five-year deal with Sirius expires at the end of December. Karmazin also indicated that Sirius XM was close to renewing its deal to carry NFL broadcasts. Meanwhile, the recent refinancing of some of its debt has left the company in a much more favorable position going forward with significantly reduced interest on its debt. Sirius XM has also benefit from a rebound in auto sales.

Among other developments, Sirius XM Radio's next broadcasting satellite was successfully put into orbit recently by a Russian Proton-M carrier rocket. Sirius XM Radio plans to launch another satellite, Sirius FM 6, in late 2011.

In terms of stock performance, Sirius XM shares are up nearly 139% since the beginning of the year.

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