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(AP) - Sirius XM Radio Inc., the satellite radio provider that was on the brink of bankruptcy nine months ago, on Thursday reported a much improved third quarter as it signed up more subscribers and paid down debt.
Sirius has been battered by the downturn in the auto industry as plunging car sales meant its satellite radios were being installed in fewer vehicles, hurting subscriptions. But the company has aggressively cut costs by integrating the operations of former rival XM Satellite Radio Holdings Inc., which it bought in July 2008.
Sirius, the home of radio shock jock Howard Stern, posted a quarterly loss of $149.2 million, or 4 cents per share — much smaller than last year's loss of $4.9 billion, or $1.93 a share.
The latest quarter included a $138 million charge to pay off a credit line extended by Liberty Media Corp. and to take on new debt at a lower interest rate. Last year's third-quarter loss was significantly inflated by a $4.75 billion impairment charge. Excluding these and other charges, Sirius would have reported a profit of $106 million compared with a loss of $37 million a year ago.
Revenue rose to $618.7 million from $488.4 million in the year-ago period, which included only two months of business from XM. But assuming that XM had been fully integrated then, revenue would still have edged up from $613 million.
Analysts polled by Thomson Reuters were expecting a loss of 2 cents per share on revenue of $608.7 million.
Central to the company's turnaround has been CEO Mel Karmazin, who was faced with a tight credit market and debt coming due that Sirius was hard-pressed to repay. Analysts had speculated that Sirius would be forced to file bankruptcy.
Karmazin, the former president of Viacom Inc., said in an interview that attorneys had advised the company to preserve cash and not make the February payment if it planned to file Chapter 11. But Karmazin said he didn't want to do that.
Then Liberty came to the rescue with a $530 million loan, taking a 40 percent stake in the company. That thwarted an overture by Charlie Ergen, CEO of EchoStar Corp. and Dish Network Corp., who held some Sirius debt coming due in February and thus carried considerable clout.
Ergen had offered to loan the company money as well but wanted a bigger ownership stake in exchange than did Liberty, which is controlled by media mogul John Malone. Karmazin said Liberty's offer, with negotiations headed by Malone's right hand, CEO Greg Maffei, was a better deal.
"At the end of the day, our board decided that we wanted to get through this," Karmazin said in an interview. "But keeping the largest amount of ownership of our company for our existing shareholders was something we wanted to do."
Karmazin said Sirius has since repaid Liberty the money it's owed. Now, Sirius is seeking to diversify its sources of income so it won't be too dependent on the auto industry.
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