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Sirius XM Posts $236M Loss For 1Q

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The slump in the U.S. auto industry helped send Sirius XM Radio Inc. to a loss of $236.6 million in the first quarter and its first-ever quarterly decline in net subscriber additions.

But the satellite radio company, whose personalities include shock jock Howard Stern, also said it has enough access to financing and cash generated from operations to meet its debt obligations this year and in 2010.

Sirius XM's first-quarter net loss attributable to common shareholders amounted to 7 cents a share for the three months ended March 31.

The loss was larger than the $104.1 million that Sirius reported as a standalone company in the first quarter a year ago. But that was before its July acquisition of XM Satellite Radio Holdings Inc.

The latest results include a hit of $186.2 million related to preferred stock issued when Liberty Media Corp. rescued Sirius from a possibile bankruptcy filing in February because it didn't have enough funds to meet debt coming due.

Sirius said its revenue rose to $587 million from $270.4 million a year ago when it was a standalone company. Adjusted revenue was $605.5 million, which adds back $18.5 million in prepaid subscriptions that was excluded for accounting purposes due to its XM purchase, compared to pro forma revenue of $578.8 million in the prior year. The pro forma figures assume the companies were combined a year ago.

Results missed the forecast of analysts, who on average were expecting a loss of 2 cents per share and revenue of $646.5 million, according to Thomson Reuters.

But the New York-based company raised its 2009 forecast for adjusted income from operations to over $350 million from more than $300 million.

Shares of Sirius fell 8 cents, or 14 percent, to 45 cents in morning trading.

In the quarter, Sirius lost over 404,400 net subscribers, compared with a gain of nearly 626,000 a year ago. Sirius XM ended the quarter with 18.6 million subscribers, down from 19 million from the end of 2008 and up from 18 million in the first quarter of 2008.

Most of the decline was due to falling U.S. auto sales. The Chrysler LLC bankruptcy will affect Sirius' second-quarter results.

"All of this is out of our control," said Chief Executive Mel Karmazin. "We're not in the business of selling the cars."

He said about three-quarters of Sirius' subscriber gains, before cancellations, come from auto manufacturers. Karmazin also noted that Sirius signed a new contact with General Motors Corp. that extends their relationship until 2020, including "very improved economics" for the satellite radio company.

Murray Arenson, an analyst at Janco Partners, said that while cash flow performance was "much improved," subscriber growth was "weak."

"Subscriber visibility remains poor, and the Chrysler bankruptcy will negatively affect subscribership further," he said in a research note.

The demise of Circuit City Stores Inc., which announced in January that it was shutting down after 60 years of business, also hurt Sirius XM because the retailer sells its radios. Karmazin said customers flocked to Wal-Mart Stores Inc. instead, but these customers tend to have higher cancellation rates and are "not the best customers" of satellite radio.

Karmazin said Sirius' decision to adopt a "poison pill" provision _ which usually is used to thwart unwanted takeovers _ was solely designed to protect its ability to deduct losses from taxes. If someone accumulated shares of Sirius, and together with the stake held by Liberty Media, it could trigger a "change in control" situation and cause Sirius to lose the tax benefit.

Looking ahead, Sirius has had talks with DirecTV Group Inc.'s chief executive, Chase Carey, on "things we could potentially do together," Karmazin said.

Sirius expects to be available on the iPhone and iPod Touch before the end of the second quarter. It also is working with used car dealers to boost subscribers.