Barrington Research analyst Jim Goss writes in a recent report that he feels Sirius Satellite Radio Inc. is "better positioned" than XM Satellite Radio Holdings Inc. to achieve profitability should the merger not go through.

"We continue to believe that the FCC will likely approve the merger, although the time frame remains unclear," write Goss.

Barrington adds that, "if the merger is blocked or the approval language contains unacceptable conditions, we would continue to favor Sirius as the better standalone operator." Goss said that Sirius is "better positioned" than XM "to achieve profitability in a shorter time frame with relatively less downside risk."

In a report on XM, Goss noted that, "In the event that this does not occur, we feel some risk would exist in the stock."

[RadioInk]

Despite falling U.S. auto sales, XM Satellite Radio delivered the highest number of vehicle based subscriptions in satellite radio history, said CEO Nate Davis during yesterday's earnings call.

"Even with the relative softness in the US auto-market, XM delivered the largest number of OEM growth additions in the history of satellite radio," Davis said.

XM had over 800,000 gross OEM additions and roughly a million factory installed XM radios manufactured and delivered to dealers in the quarter, Davis told investors. "That is a 48% year-over-year quarterly increase."

XM ended the quarter 355,000 net subscriber additions from the OEM channel, while Sirius brought in over 321,000 net subscribers from the automotive channel.

Still, XM had a net loss of 51,000 subscribers from the Retail channel, while Sirius squeaked out just over an additional 2,500 subscribers from Retail

Davis explained that while the company had successfully increased direct retail sales to their website and call centers, those increases did not offset "the continuing decline in overall retail sales through the big box retailers."

"However, offsetting this retail weakness... is a continued acceleration of our OEM growth," said the CEO. "XM 2008 installations could well exceed 4 million units close to the long range estimate we provided a number of year's ago."

[Transcript via SeekingAlpha]

XM Satellite Radio Holdings Inc. today announced its earnings and financial results for the first-quarter of 2008.

XM ended the quarter with 9.33 million subscribers, an 18 percent increase, from the first quarter of last year. This growth was driven by a 49 percent year-over-year increase in OEM gross additions which totaled 802,000 - that's compared to 537,000 in first quarter of 2007.

XM added 1.034 million gross subscribers for the period (compared to 868,000 last year), and 303,000 net subscriber additions (compared to 285,000 last year).

Revenue for 1Q08 rose to $308 million, a nearly 17% increase over 1Q07 revenue of $264 million.

Adjusted operating loss was $30.7 million, compared to a loss of $27 million in first quarter 2007. The first quarter 2008 adjusted operating loss includes $3.5 million of merger related expenses, compared to $9.2 million in first quarter 2007.

XM's net loss for 1Q08 was $129 million, or 42 cents a share, compared to a year-ago net loss of $122 million, or 40 cents a share. Analysts were expecting a loss of 39 cents a share on revenue of $313 million, according to Thomson Reuters.

In first quarter 2008, XM's subscriber acquisition costs (SAC) increased to $73, compared to $65 in the same period last year. Cost per gross addition (CPGA) fell below $100 to $99 for the first time since 3Q06 and compares to $103 in first quarter 2007. Average revenue per subscriber (ARPU) fell to $10.04 from $10.15 in the year-ago quarter.

View full financials after the jump...

XM Satellite Radio has also announced that they will holding their Q1 earnings conference call on Monday May 12th, at 10am ET.

As usual, there will be a webcast of the call, or you can dial-in at 877-265-5808 (Conference ID#: 46660772).

Of course, everyone is crossing their fingers - but not holding their breath - that the FCC will have ruled by then.

An analysis of a regulatory filing by the Associated Press has revealed that XM Satellite Radio Holdings Inc. CEO Nate Davis received a cool $4.85 million in compensation last year.

Davis received a salary of $560,416, plus $747,500 in nonequity incentive-based compensation in 2007, according to the SEC filing. In addition, he also received stock awards valued at $3.54 million.

By comparison, XM's former-CEO Hugh Panero received a compensation valued at $3.71 million including $3.075 million in stock awards in 2006. Then in 2007, Panero received compensation valued at $7.27 million, including $538,522 in salary, a severance payment of $4.95 million and stock awards of $1.77 million.

[AP]

Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. have both announced that they have postponed their 2008 annual meeting of stockholders.

The meetings were originally scheduled for May 20th and May 23rd for Sirius and XM respectively. A new date will be set when they have more information relating to the timing of the merger.

New Citi analyst Tony Wible issued a client note this morning, assuming coverage of the satellite radio industry with a "Buy" on Sirius Satellite Radio Inc. and a "Hold" on XM Satellite Radio Holdings Inc.

"Satellite radio should continue to change the audio entertainment industry and gain share as its proves to be fresh (no need to create play lists or buy MP3s), original, cost effective, and a simple way to access premium/long tail content that can not be supported via radio or MP3 models," wrote the Citi analyst in the note. "Given the highly fixed cost base of the companies, we view the sub growth as the key driver of the stocks and we see the industry having up to 55 mil subs by 2011."

Wible also rated SIRI as a "Buy" with an $8 target based on a 70% probability that the deal closes. He rates XMSR with a "Hold" with a $12.25 target price.

The Citi analyst believes that the SIRI stock - as a merged entity - would be worth $10.

The perpetual delays in getting the approval from the Federal Communications Commission may be the least of worries for Sirius and XM.

TheStreet is reporting that analysts are expecting XM Satellite Radio Holdings Inc., which TheStreet says is set to release its results on Thursday, to post a loss of 39 cents a share, according to a Thomson First Call survey. Sirius Satellite Radio Inc. is expected to lose 7 cents a share as well, when it reports on April 29th.

Shares of Sirius and XM have fallen more than 15% since the last reporting quarter's results in late February.  

"Excluding the merger proposal, we do not believe the fundamentals, subscriber growth curves, or risk-adjusted estimates support a premium or equal valuation for Sirius versus XM," wrote Goldman Sachs analyst Mark Wienkes in a February 26th research note, adding that "trends in subscriber adds, churn, and [average revenue per subscriber] confirm our cautious view on the industry."

For Sirius, increases in the churn rate and subscriber acquisition costs (SAC) are what especially trouble analysts, especially in a troubled economy. Monthly churn is expected to rise slightly from 2.3% in the fourth quarter. At the same time, SAC will likely rise from $90 to a range of $95 to $100, according to several analysts. Inreasing churn and growing SAC are also a concern for XM.

But it's the concern of transforming from a retail-based business model to an OEM-driven model that seems to be the most troublesome, according to TheStreet.

Penetration rates have increased in the automotive sector, but in March auto sales fell 12 percent from a year earlier on an unadjusted basis.

"Recent comments from the automotive industry indicate that many of the issues impacting the subprime [and collateralized debt obligation and loan obligation] market are projected to trickle down and carry negative implications on new car sales, implying around 15 to 16 million units sold in 2008," said Goldman's Wienkes. "As satellite radio operators progress toward an OEM-centric model, watch for primary and derivative effects of a housing and auto slowdown to temper the subscriber ramp."

What TheStreet doesn't mention is that Sirius and XM aren't blind to this, and have said that the increasing penetration rates will offset the declines in auto sales. Whether or not this holds to be true will be seen soon enough.

Analysts also anticipate that the conversion from OEM promotional subscribers will decline - although during the fourth quarter the conversion rate actually increased from 52.4% to 53.9% year over year. For the full-year though, the conversion rate fell slightly from 53.3% in 2006 to 52.7% in 2007.

"Sirius installs will approach 70% of manufactured cars at Chrysler and Ford by year-end 2009 with penetration in other models such Volkswagon and Audi approaching 80%," said RBC Capital Markets analyst David Bank in a note in February. "But the outlook for auto sales is soft, and retail ... demand is anemic, so near-term upside to subscription estimates is probably limited."

As for average revenue per user, or ARPU, TheStreet says that Sirius is expected to see ARPU tick higher in the first quarter, many analysts expect it to go down for XM. And in the event the merger gains FCC approval, ARPU is not expected to improve much as the time progresses.

"We assume no ARPU synergies as the combo may have to agree to price restrictions to get a deal done," said Stifel Nicolaus analyst Kit Spring in a March 25 research note. "We calculate a net ARPU impact over time of a negative 2% to 5%, getting worse over time as the percentage of radios that are a-la-carte capable increase."

[TheStreet]

Now that Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. have approval from the Justice Department, let's check in on the investment analysts' take on the road ahead...

• Benjamin Swinburne, Morgan Stanley:
  Following closing of the merger, both Sirius and XM "should benefit from some lift in demand from combined programming offerings." But a critical factor, from an investor's standpoint, will be the ability to renegotiate large OEM and programming contracts, in addition to creating new demand and increasing conversions.
  
  "The challenges facing the industry, however, will not go away as a result of the merger," writes Swinburne. Now the focus shifts to free cash-flow.
  
  
• Jeff Wlodarczak, Wachovia Capital Markets:
  "With the DOJ decision now out of the way, FCC approval would appear to be a foregone conclusion," writes Wlodarczak in a recent note, noting that there are likely to be conditions placed by the Commission.
  
  Wachovia doubts the merger will "materially reignite demand" for satellite radio, but "realistically as a combined entity they have a much greater chance for long-term survival," in their view.
  
  
• David Bank, RBC Capital Markets:
  RBC continues to "remain on the sidelines" from an investor's view, noting that "any 'bounce' from potential completion of the merger may largely factored into current valuation."
  
  But what of the FCC? Bank notes that the FCC tends to "follow in the DOJ's footsteps" so they're more confident in final approval.
  
  "In terms of timing, it's difficult to know, but some time in the next 2 weeks to 8 weeks would seem realistic given chatter we are hearing from our Industry sources," write the RBC analyst. The question now is the conditions that the FCC will impose.
  
  
• Blair Levin, Stifel Nicolaus:
  Aside from what was already posted, Stifel Nicolaus notes that there has been some significant negotiations regarding conditions at the FCC. And that there's one wildcard still out there: The NAB.
  
  "If the FCC clears the deal, it's possible the NAB could challenge the FCC decision in court," writes Levin. "But we would expect the broadcasters' legal prospects to be uphill."

Approval for the merger between Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. "now appear less likely" since a decision has been delayed for so long, according to Pacific Crest Washington.

Erik Olbeter, analyst for Pacific Crest, said that "prospects for the merger have become increasingly cloudy" in a research note issued this morning.

Now that we're nearly 13 months into the process, Olbeter says the delay in approval "suggests that the FCC and Department of Justice are having a hard time justifying the deal."

While word has it that both the DOJ and FCC "are inclined to approve the merger," Olbeter says that "an argument for the deal that does not set a significant, far-reaching precedent appears elusive."

Investors don't seem bothered by Olbeter's comments as shares of both SIRI and XMSR edged up during Wednesday trading.

[Barrons]