WRSP
Worldspace Inc., a provider of subscription satellite radio services to subscribers outside the United States, joined the satellite operator IPO Class of 2005 Aug. 4 when it’s the company’s class A common stock began trading on the Nasdaq National Market.
For its first day of trading, the stock closed above its IPO price. Worldspace priced the IPO at $21 per share, and the stock closed the day at $22.36, trading as high as $26 early in the day. The slight run-up could speak to investors having a favorable opinion on Worldspace’s prospects, especially with the recent investment in the company by XM Satellite Radio.
One thing that could hamper the stock’s performance in the near term (and possibly longer) is an interesting disclosure in the company’s prospectus about some of its backer’s alleged ties to terrorist activities. The prospectus notes that investors in question “have repeatedly denied all such allegations,” though those investors no longer have any voting control over the company, Worldspace said.
Quarterly Reports: NSE
New Skies Satellites Holdings Ltd. reported revenue of $59.7 million in its second quarter 2005, the company said Aug. 4. The net loss in the second quarter 2005 was $13.2 million, compared to a profit of $19.5 million a year ago.
“I am pleased to report that we increased revenues 16 percent relative to the same period last year, primarily a reflection of the fact that we sold a significant amount of capacity throughout the last 12 months,” New Skies CEO Dan Goldberg said in a statement. New Skies attributed the growth in revenue to increased fill rate, as transponder usage grew from 52 percent to 61 percent throughout the past year. It attributed the net loss for the quarter to higher interest charges arising from the debt New Skies put in place to finance the acquisition of New Skies Satellites N.V. by affiliates of The Blackstone Group as well as a one-time fee associated with the initial public offering.
The numbers were well received by at least one Wall Street analyst. Vijay Jayant, cable satellite and entertainment analyst for Lehman Brothers, said in an Aug. 4 research report that revenues and utilization rates exceeded expectations.
Investors, however, did not react positively to the numbers, as New Skies closed Aug. 4 at $20.13, down from its previous close of $20.72. The Aug. 4 closing price was the lowest since July 11, when the stock closed at $19.97. However, the drop was not so dramatic that it might cause one to take a closer look as to what is really going on, and if New Skies continues to report growth, we don’t expect price drops to be triggered by future financial reporting.
Quarterly Reports: SIRI
Sirius Satellite Radio Aug. 2 reported record revenues for its second quarter 2005, driven by increased subscriber numbers and low churn. However, the company also reported a widening net loss due to higher subscriber acquisition costs, programming costs and other expenses.
As of June 30, Sirius had about 1.8 million subscribers, including the addition of 365,931 net subscribers during the second quarter 2005, a 184 percent increase compared to the same period a year ago. About 245,000 of the subscribers came from retail channels, with about 122,000 added through Sirius’ partnerships with automotive manufacturers.
During a conference call with analysts, Sirius CEO Mel Karmazin said the company has reached parity in the retail market with rival XM Satellite Radio, gaining a 48 percent share of the retail market. Given its continued subscriber growth, Sirius raised its subscriber guidance to 3 million subscribers by the end of 2005, up from previous guidance of 2.7 million. Karmazin attributed the increasing subscriber figures to a 94 percent customer satisfaction rate.
Sirius reported record revenues of $52.2 million for the second quarter 2005, a 295 percent increase from the $13.2 million in revenues reported in the second quarter 2004. The net loss for the quarter was $177.5 million, compared to a net loss of $136.8 million reported in the same period a year ago.
“Sirius reported a solid quarter and increased its 2005 guidance to the high end of the Street range, which is where we have been,” Legg Mason analyst Sean Butson said in an Aug. 3 research report. “Further, Sirius clearly has a cost focus that we believe was lacking in 2004 and is achieving parity with [XM Satellite Radio] in the retail channel. We continue to believe that the Street has significantly underestimated subscriber growth in 2006 given that Ford really starts ramping up and Howard Stern starts in January.”
Investors reaction to the quarterly numbers resulted in a slight dip in the Sirius stock price, which dropped 20 cents to $6.75 Aug. 2. That loss was erased Aug. 3, before Sirius closed Aug. 4 at $6.81, fluctuations that suggest the numbers were more or less inline with investors expectations.
Quarterly Reports: DTV
DirecTV Group Inc. earned $162 million in its second quarter 2005, rebounding from a net loss of $13 million in the same period a year ago, DirecTV reported Aug. 4. Revenue improved 21 percent to $3.2 billion in the same timeframe, while operating profit has more than tripled to $523 million.
Net income also improved due to the increased operating profit and a $31 million tax credit related to the favorable settlement of a U.S. federal income tax dispute associated with a previously divested business. DirecTV added 225,000 net subscribers during the second quarter 2005, slightly down from a year ago, due to an average monthly churn rate of 1.69 percent.
“Our second quarter results are indicative of the substantial profit and cash-generating potential of DirecTV U.S.,” Chase Carey, president and CEO of DirecTV, said in a statement. The results “are a reflection of our profitable growth strategy to drive strong subscriber and ARPU [average revenue per user] growth, while also increasing margins through improved cost management, particularly in key areas such as subscriber acquisition and upgrade/retention marketing.”
“Despite churn results, we view the results positively, particularly the strong gross customer additions…in the face of reduced market spending,” Morgan Stanley analyst Benjamin Swinburne said in an Aug. 4 equity research report. “The key question going forward is whether the company’s stronger credit scoring policies result in lower churn rates in 2006 and if the company can maintain retention marketing at the reduced second quarter 2005 levels going forward.”
Douglas Shapiro, analyst with Banc of America Securities, noted in an Aug. 4 equity research report that DirecTV results “were better than our estimates across the board, highlighting good cost controls, with the notable exception of higher churn.”
DirecTV was the one company we looked at this week that closed up following well-received quarterly numbers, climbing 42 cents to $15.83 Aug. 4.
