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Sirius Still in the Woods with Announced Subscriber Additions

Yesterday, Sirius XM (SIRI) announced that it had added 257,028 net subscribers in the fourth quarter of 2009 and expected positive free cash flow for the year as a whole. But the snapshot of improved health isn't the full medical picture.

Two consecutive quarters of subscriber additions is important, but still leaves the company down by 231, 098 subscribers, or 1.2 percent, from the end of 2008. Look at the chart below, and you can compare the quarterly audience levels (quarters before the merger of Sirius and XM are additions of the audiences of both) with a moving average trend line. With some variation, the size of the audience has been relatively flat for two years now. The additions are unimportant, because the stalled trend is still heavily in place. As Sirius noted in its press release, "total paid and unpaid trials included in the sale of a vehicle remained level with the prior quarter and the prior year at approximately 3.6 million," and automobile-related sales are an important mechanism in getting people accustomed to subscribing.

Certainly throwing off free cash is important, but so is stock price, and even with the "good" news, a share was going for over 66 cents at the close of business yesterday. That's still a long way off from the dollar a share that the company needs. For those not remembering, Sirius has been in danger of being de-listed from Nasdaq because its share price has closed below the $1 threshold limit for a long time.

Sirius has to do something. The board has held off from pushing for the speculated reverse stock split to boost the price, but only has until March 15 to fix the problem, and that's less than two months away at this point. And it's unlikely that the spate of good news will continue. I think the company is still gliding from the cash for clunkers program, with the sudden surge of car sales now seeing a payoff from trial subscriptions of the increased volume turning into paid ones. But that boost will now have petered out, and with Internet music service Pandora targeting the auto industry and auto manufacturers tying wireless handsets into cars, there is increased competition. That means hoping for more than level might be overly optimistic.

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