Sirius Results Cast Doubt on Viability

Sirius Satellite Radio Inc., which began nationwide operations last month after numerous delays, failed to meet Wall Street expectations Tuesday, casting doubt on the company’s ability to survive.

Sirius has only 6,510 subscribers as of Sunday and projects it will have 75,000 by the end of the year, the company said in its second-quarter earnings report. The company won’t break even until it has 3 million subscribers, according to the filing.

Investment bank Ladenburg Thalmann & Co., which had predicted 91,000 subscribers by year’s end, downgraded the company from “buy” to “market perform.”

“There was a lot not to like about what they had to tell us [Tuesday],” analyst John Stone of Ladenburg Thalmann said.

Sirius’ second-quarter net loss grew to $113.3 million, or $1.62 a share, from $62.1 million, or $1.35, a year earlier, the company said. Revenue was $70 million. The company had no sales in the year-ago quarter.

In addition to the slow growth in subscribers, the big problem for Sirius is how much money it needs to raise, Stone said. According to the filing, Sirius has $295 million in cash, which company officials said will take it through the second quarter of next year. Then the company needs to raise an additional $300 million to get through 2003.

“This is not a great time to raise money. There is just not a lot of appetite in the market today for companies that need cash to break even,” said Stone, who owns stock in Sirius. Ladenburg Thalmann neither owns stock in nor does business with the company.

The company is negotiating with private-equity firms Apollo Management and Blackstone Group, holders of about $500 million of preferred stock, about an additional investment, people familiar with the matter said. Sirius also is talking to bondholders about exchanging debt for equity.

Sirius charges customers $12.95 a month for access to about 100 commercial-free radio channels.

Shares of New York-based Sirius slid 72 cents, or 35%, to $1.35 on Nasdaq. They have fallen 88% this year.

Bloomberg News was used in compiling this report.