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Mel Karmazin sounds an upbeat tone for a chief executive whose company, Sirius XM Radio (SIRI, news, msgs), just announced a loss of almost $5 billion.
During a conference call with analysts and reporters to discuss third-quarter results, Karmazin on Monday called the company's performance "impressive," considering the macroeconomic environment.
Indeed, the troubled satellite radio provider showed some encouraging signs.
The company ended the quarter with 18.9 million subscribers, up 17% from a year earlier. Sales also rose for Sirius XM, the product of the July merger of XM Satellite Radio and Sirius Satellite Radio. Had the company been combined for the full three months that ended in September, its revenue would have risen 16% to $613 million.
Karmazin also waxed optimistic about the company's ability to refinance $210 million in debt due in February, some of the $1 billion in liabilities the company faces this year.
"The tone of the conference call seemed to provide some needed, if inconclusive, reassurance on the near-term debt refinancing," says Tuna Amobi, an analyst at Standard & Poor's.
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For some companies, growth of any kind is commendable when the economy is slumping into recession and customers are curtailing spending on everything but the essentials.
"We are growing significantly, and companies larger than us and smaller than us are not," Karmazin said.
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Growth aside, some of the company's biggest challenges haven't subsided.
Sirius XM sustained a third-quarter loss of more than $4.88 billion, reflecting the declining value of its merged assets.
And investors are still awaiting details on debt refinancing from a company that has expressed confidence on the matter for months.
Further, results through September don't reflect more recent economic troubles, including new indications of a collapse in the U.S. auto industry, a big source of sales of Sirius radio service.
While Karmazin said the company's higher-end packages are selling well, subscribers may yet tighten their belts and cut back on satellite radio.
"They are a very, very discretionary expense," Larry Rosin, co-founder of consulting firm Edison Media Research, says about Sirius XM. "Families are cutting their expenses. It seems doubtless they'll lose some people that way."
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Signals of changeCEO Mel Karmazin explains why he thinks newly merged Sirius XM Radio will be a hit with subscribers and investors. He appeared on CNBC after regulators OK'd the deal on July 30.
The company's projections for earnings before certain expenses including taxes are holding steady against prior guidance. While many analysts still expect Sirius XM to lose money next year, the company is guiding for cash flow to break even.
To meet targets, the company is slashing costs -- in part by eliminating 22% of its work force. More drastic measures may be called for, Amobi says. "They are probably going to go deeper."
This article was reported and written by Olga Kharif for BusinessWeek.
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