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SIRIUS XM Beats Subscriber Estimate

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SIRIUS XM Radio Inc. (SIRI">SIRI) recently announced that the company has completed the year 2011 with 1.7 million net customer additions, surpassing its previous projection of 1.6 million net customer additions.

SIRIUS XM added approximately 1.16 million subscribers in the first nine months of fiscal 2011 with an average of 386,000 customers per quarter.

However, in the last quarter, the company added nearly 540,000 customers, which in itself is the most since 2008, and helped the company surpass the projected customer growth for the year.

We believe that the significant subscriber growth in the fourth quarter was mainly attributable to the launch of SIRIUS XM 2.0 product suite and expansion of channel line ups (inclusive of Latin channels).

SIRIUS XM 2.0 supports WiFi, Bluetooth, Internet, and will expand its existing bandwidth by 25%. It also features time shifting, replay, pause, rewind facilities and can be upgraded to higher versions. Such an innovative product has brought about a radical change in listening to radio music and has resulted in massive subscriber growth for the company.

In December, 2011, SIRIUS XM launched the advanced version SIRIUS XM 2.0 called “Lynx.” Lynx is touted as the next-generation satellite receiver that allows the subscribers to stream content to home audio systems via Bluetooth. It also features high-resolution touch screen support and allows 200 hours of music storage, hence providing more options to the users to access their favorite music anytime and from anywhere. Such innovative product launch will certainly act as catalyst for growth going forward.

Despite higher programming costs and sluggish U.S. economic growth coupled with stiff competition from Pioneer System and other media players like Cumulus Media Inc. (CMLS">CMLS), we expect the company to perform well based on increased programming line ups and improved ratings. We, thus, maintain our long-term Outperform recommendation on SIRIUS XM.

Currently, the company has a Zacks #3 Rank, implying a short-term Hold rating.

Based in New York, SIRIUS XM provides satellite radio services in the U.S. and Canada.

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