Sirius XM Radio takes a $4.8 billion hit on new acquisition, blames sluggish auto sales

11 November 2008

Sirius XM Radio Inc. said its third-quarter loss widened on a $4.8 billion non-cash impairment charge related to the reduced value of certain assets since it agreed to acquire XM in February 2007.

The company, which completed its purchase of XM Satellite in July, said it lost $4.88 billion, or $1.93 a share, compared with a loss of $119.6 million, or 8 cents a share, a year earlier when it stood alone as Sirius Satellite Radio.

It blamed the write-down, which added to its operational losses in the third quarter, on the significant decline in its share price from February 2007, when the merger was first announced. At that time, Sirius traded at about $3.79, compared with 27 cents at the close on Monday.(See: US regulators approve Sirius-XM merger to create satellite radio monopoly)

Sirius XM said that excluding the impairment charge, stock based compensation and other items, it would have lost 9 cents a share in the September quarter. On a pro forma basis, revenue rose 16 per cent to $613 million. Analysts were looking for revenue of $575 million and a loss per share of 9 cents for the quarter.

CEO Mel Karmazin defended the company, saying that while it provides a radio service that subscribers enjoy, it is powerless to fix the economic troubles that have beset the auto industry -- its biggest source of new subscribers.

"We think the environment sucks," he said on a conference call with analysts. "It is not like we're doing something wrong. It is that, unfortunately, we do not have a whole lot of control over what cars are getting sold. We do our best."

Karmazin said he expects the company to work through the refinancing of more than $1 billion in debt due on 2009. He added that a $300 million portion due in February has been reduced to $210 million, and that the company is talking to its lenders about refinancing.