Retail sales of XM Satellite Radio receivers are below expectations, but XM CEO Nate Davis says OEM sales have more than counteracted that decline and will surpass expectations for 2007. Management remains optimistic that its merger with Sirius will get regulatory approval by the end of this year, but regardless XM management remains focused on running its business.
Q3 retail sales of receivers fell 22% and Davis noted that churn actually exceeded new retail sales. But the company is predicting that Q4 OEM sales will hit one million, meaning that total OEM sales will surpass XM’s forecast of three million. Despite moving into lower priced vehicles, XM said its OEM conversion rate remains stable, with 52.5% of new car buyers converted to subscribers as their trial periods ran out in Q3. The overall churn rate decreased to 1.69% for the quarter from 1.82% a year earlier.
XM is forecasting that it will finish the year with 9-9.2 million subscribers and that subscriber revenues for this year will be around a billion bucks. Since the last week of December is a big week for new receiver activations, the company warned that costs will be up for Q4, with the payoff pushed into next year.
As for the pending merger with Sirius, Chairman Gary Parsons insisted that he is "as confident today as we have ever been" and he is still optimistic about getting FCC and DOJ approval by the end of this year. Asked whether the current political turmoil over the FCC’s efforts to revise its broadcast ownership limits, Parsons insisted that the issue does not directly relate to the assessment of the XM-Sirius merger.
RBR/TVBR observation: Maybe it’s not directly related to the ownership review, but we sure haven’t heard of any FCC member being willing to stick his/her neck out and say they plan to vote to approve the merger. The only Commissioner on the record one way or the other is Michael Copps, and his vote is "no." That leaves the satellite guys still three short of the three votes they need on the FCC – and that’s the easy part. DOJ is the bigger hurdle.