Barrington analyst James Goss issued a progress report on Sirius XM today outlining Sirius XM's quarter today. The firm rates Sirius XM as Market Perform due to the 40% dilution due to the Liberty Investment into the company.


The analyst noted that the GAAP net loss and subscriber growth were below their expectations, but on the positive side, expense levels were lower than their estimates almost across-the-board, because of what Goss attributes to synergistic cost savings. Goss also notes that some of the future expected savings will be sacrificed because of higher interest expense on the debt refunded by Liberty Media.

Some key metrics noted by Goss include fourth quarter revenues were $644.1 million (16% increase year-over-year), which was below the Barrington estimate of $651.3 million. Cash operating expenses fell 22%year-over-year and Goss noted that this is a sign that merger synergies are starting to materialize. On the downside Goss noted that several items below the operating income line affected net income, including losses from redemption of debt. The bottom line figure was a GAAP net loss of $0.08, compared to their estimate of a loss of $0.06.

As with other analysts Goss pointed out weak subscriber growth in Q4 of 2008 and below the Barrington expectations. Goss cited weak auto sales and the closing of Circuit City as contributing factors.

Goss is among the first analysts to note a significant decrease in the OEM conversion rate, which measures the percentage of customers who become self-paying customers following the end of their promotional period. This conversion rate dropped to 44.2%, down from 47.0% in Q3/08 and 51.4% year-over-year.

Goss and most analysts seem to be looking at this equity with a more conservative eye these days. Should the company be able outperform in the coming quarters, it could bring about more positive analyst coverage going forward.

Position: Long Sirius XM Radio