UBS analyst Lucas Binder Issued a report today on XM's Q4 and Full Year 2007 operating results.


4Q07 Results; Y-O-Y Growth In Net Adds

XMSR reported solid 4Q07 results ahead of our estimates
XMSR reported generally better than expected 4Q07 operating metrics. Highlighted by y-o-y growth in net adds of 460k vs. UBSe of 433k and flat ARPUof $11.71 vs. UBSe of $11.35. Subscriber rev of $266M was slightly better thanUBSe of $261M. Total rev of $308M were better than UBSe of $299M. Reported EPS loss of $(0.78) was worse than UBSe of $(0.56) due to much higher revenue share and royalties.

Settlement with RIAA; lower EBITDA As a result of merger and settlement related charges, EBITDA loss of $(117)M was worse than UBSe of $(72)M. The biggest contributor was $54M more in rev share and royalties, which we believe was associated with the RIAA settlement and trueups for the quarter.

4Q07 conference call XMSR will hold its 4Q07 conference call at 10:00AM. The dial-in number is 877-265-5808, #35479749. Management believes regulatory approval of the merger could be in the “near future”. We expect management to discuss growth in the OEM channel and provide its latest update on the merger process on today’s call.Valuation: Maintain Neutral rating with a $12 price target We base our price target on a detailed DCF analysis, using 3.0% growth in perpetuity and a 13.0% WACC.

Position - Long Sirius, XM