SIRI

While XM Satellite Radio has had a comfortable lead in terms of subscriber numbers, investors may be looking more favorably at Sirius Satellite Radio at the moment.

The telling number is that when XM last week reported a widening net loss among a series of positive metrics, its stock price dropped (SN, Oct. 31). Sirius also reported a widening net loss, among other positive metrics, yet its stock price rose Nov. 1, the day the report was made public, and continued to rise in the days that followed suugesting investor confidence in Sirius’ future.

Subscriber gains helped Sirius Satellite Radio post revenue of $66.8 million in the third quarter 2005, a 250 percent jump over revenues of $19.1 million in third quarter 2004, the company said. Sirius posted a loss of $180.4 million in the third quarter 2005, compared to a loss of $169.4 million in the same period a year ago.

Sirius reported 2.2 million subscribers at the end of the third quarter 2005, with 359,000 net additions during the quarter, which closed Sept. 30. At the end of the third quarter 2004, Sirius had 662,000 subscribers. The company raised its year-end subscriber expectations to more than 3 million.

Subscriber acquisition costs were $149 million for the third quarter 2005, a 35 percent improvement over the third quarter 2004. Sirius continues to forecast subscriber acquisition costs of less than $145 for 2005.

Tom Watts, analyst with SG Cowan & Co. said in a Nov. 2 research report that Sirius “outperformed on most metrics during [the third quarter]. We expect this performance to continue in [the fourth quarter] and through 2006.” Watts said Sirius’ new wearable radio and aggressive promotion of Howard Stern, who is scheduled to being broadcasting on Sirius in January, “should drive record net adds. We also expect unprecedented marketing activity and highly competitive rebates to edge our XM in retail market share.”

The one metric that Watts noted did not meet expectations was the company’s churn, which came in at 1.8 percent compared to SG Cowan and consensus estimates of 1.5 percent. Watts attributed the higher churn to the expiration of a service pricing promotion.

Sirius also received a boost this week when DaimlerChrysler announced Oct. 31 the extension its exclusive relationship with Sirius through Sept. 1, 2012. The agreement covers all Chrysler Group and Mercedes-Benz vehicles and Freightliner Trucks. Sirius said it expects more than 750,000 subscribers to be generated from model year 2006 Chrysler Group sales, with volumes estimated to increase significantly in the future.

“We think this is a very positive announcement for Sirius and its progress on the [original equipment manufacturer] front,” Robert Peck, analyst with Bear Stearns, said in an Oct. 31 research note. “With this announcement, potential further progress at Ford and the Howard Stern effect, we think there could be upside to our current 2.5 million net add estimate for Sirius in 2006.”

These two items led to a strong week for Sirius shares. Shares jumped from $6.02 Oct. 28 to $6.23 Oct. 31 with the announcement of the DaimlerChrysler relationship extension. The stock gained 29 cents the day its quarterly financial reports were released and the momentum carried through the next to trading days. Sirius closed Nov. 3 at $6.94.

XMSR

Nissan North America Inc. selected XM Satellite Radio as the factory-installed satellite radio solution for Infiniti and Nissan vehicles beginning with the 2008 model year, the companies announced Nov. 2.

More than 500,000 Nissan and Infiniti vehicles with factory-installed XM Satellite Radio are projected to be produced for the 2008 model year, with more than 1 million projected annually by the 2010 model year.

In January 2005, Nissan chose XM to be its supplier of satellite-delivered data and telematics services, such as in-vehicle messaging and XM Navtraffic, which delivers traffic information to vehicle navigation systems.

The news seemingly helped give the stock some momentum, but not enough yet to cover the losses it experienced Oct. 27, the day its third quarter financial report was issued. On Oct. 27, the stock dropped more than $3 to close at $28.07. It moved up on the following trading days and, after a dip Nov. 1, climbed to $29.73. With investors seemingly giving high marks to Sirius this week, XM seemed to gather some residual momentum.

DTV

DirecTV Group Inc. recorded a profit of $95 million on revenue of $3.2 billion in the third quarter 2005, the company reported Nov. 3. In the third quarter 2004, the company recorded a loss of $1 billion on revenue of $2.9 billion, as the company recorded a $1.5 billion write-down of Spaceway assets during the quarter.

DirecTV attributed the revenue growth to strong subscriber additions in the United States. DirecTV added 1.1 million gross subscribers and 263,000 net subscribers during the third quarter 2005, which ended Sept. 30. The company also reported higher average monthly revenue per subscriber, which improved from $66.46 during the third quarter 2004 to $68.65 in the third quarter 2005.

DirecTV ended the third quarter 2005 with 14.9 million subscribers, up from 13.5 million at the end of the third quarter 2004.

Douglas Shapiro, analyst with Banc of America Securities called the results “mixed” in a Nov. 3 equity research report, noting “solid gross adds and better [subscriber acquisition cost], but higher churn and lower net [subscriber] adds owing to continued efforts to clean up” non-paying subscribers.

“Other than the churn, however, we thought [the quarterly report was] relatively encouraging. Gross adds showed continued strong demand, [subscriber acquisition cost] was surprisingly low and retention marketing continues to decline as a percentage of sales.” Shapiro noted that churn came in at 1.89 percent, ahead of Banc of America’s estimate of 1.79 percent and consensus estimate of 1.77 percent.

The numbers did not do much to impress investors. The stock lost 29 cents Nov. 3 to close at $14.27. The stock has been stuck under $15 Sept. 19, fluctuating for the most part in the $14 range (with a single day under $14) but not gathering any real momentum to get it back up to the $16 mark, where the stock was hovering around throughout much of August.

GCOM

Globecomm Systems Inc. reported revenue of $29.6 million in the company’s first quarter 2006, up 16 percent from revenue of $25.5 million in the same period a year ago, Globecomm announced Nov. 2. Globecomm attributed the increase to increased infrastructure sales in the U.S. Government and governmental agencies marketplace.

Globecomm posted a profit of $800,000 in the most recent quarter, which ended Sept. 30. In the first quarter 2005, the company posted a profit of $2.2 million, which included a one-time gain of $1.9 million relating to a recovery from a client.

Investors reacted positively to the numbers, with the stock gaining 30 cents Nov. 2 to close at $7.45. It gained an additional 2 cents in the following trading day. The price seems to be in a sweet spot for the moment, considering the stock has been trading for the most part in the $7 range since Sept. 9, climbing above $8 a few times and not dipping below $7 during that period.