Satellite Radio TechWorld would like to start by saying that it isn't picking on Sirius. We are simply looking at the numbers. Not much consideration has been given to XM. XM's guidance is so low that it should be a cakewalk. Shame on XM if they miss guidance.
To hit the low end of their guidance, 5.9 million, Sirius will have to garner 780,692 net subscribers. If the previous churn estimates prove to be correct, then Sirius will have to gross 780,692+370,000=1,150,692 subscribers. Last quarter, Sirius grossed 732,406 subscribers. Therefore, Sirius will have to increase gross subscribers 57% in the fourth quarter. Granted, Sirius typically gets a bump in OEM adds in the fourth quarter and it has spent a lot of money on marketing and hardware is sufficiently cheap, but 57% quarter over quarter is huge. XM increased its gross last year this time by 37.7%, and that was a very good year for XM. This year, sales are dismal for satellite radio. Pulling a number out of the air, let's say that Sirius increase the gross over last quarter by a third. That should be generous. That would put Sirius' gross adds at 976,541. Take away 370,000 for churn an the net ends up around 606,541, well short of 780,692. There might be an addition bump of 100,000 OEM subscriptions and the churn could be off say 30,000 subscriptions. Adding this in, we arrive at 736,541 subscriptions.
We are inclined to believe the low end of Sirius' guidance with a possible miss. A range of 5.7 to 5.9 might have been a better guidance. Of course, this late in the game, they should have a much better idea of where the range will fall. However, I note that they lead off their PR taking about how the added 500,000 subscribers in the last 10 days last year. That simply isn't going to happen this year, nothing even close to that. However, it is possible that the Big Boxes will start dumping hardware after Christmas, maybe even before, which will add subscribers, but will give a false indication of the actual number, as XM found out last year.
We would prefer to be wrong. Alternative views are welcome.
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