Sirius XM Radio Inc (NASDAQ:SIRI) added about 622,000 subscribers in the second quarter taking its total user-base to 22.9 million.
The robust additions were riven by a rise in auto sales in the quarter. For the whole of 2012 the company has estimated new subscribers at 1.6 million on a net basis and expects to earn $3.4 billion in revenues.
During the quarter the company had to face a rise in royalty costs as also increased revenue sharing but the company used its high subscriber base to lower its fixed costs as a percentage of revenues.
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The return in customer confidence and resurgence in car sales has benefited the company, which depends to a large extent on the automobile sector for its sales growth.
July saw overall robust vehicle sales and Sirius XM's good relationship with almost all car manufacturers has held it to diversify its risks as well.
Despite forecasting a rather flat auto sales outlook for 2012, the company expects to easily reach its target of 1.6 million net additions i the year.
Sirius is facing competition on its home turf from companies such as Pandora and Clear Channel Radio that offer personalised services. Spotify and Apple are also expected to establish their presence in this particular segment.
Aware of the impending competition Sirius is already expanding its product features and launching on-demand services for Apple and Android users and it will soon start launching personalised radio services by the end of 2012, to beat the competition.
The company is now following a strategy mix which has both satellite and Internet media services. There is only a certain extent to which it can lower costs by using its growing subscriber base.
Shares of SIRI are now up 1% to $2.53 and made a new 4-year high of $2.54.
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