XM On the Move

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Market leader XMSatellite Radio (Nasdaq: XMSR) reported Q3 earnings this morning. And for this speculative company, growth is simply great. Though still in the red, XM bragged 930,000 subscribers at the end of Q3 and 1 million now, on track to meet its goal of 1.2 million by the end of the year. President and CEO Hugh Panero bragged on the conference call -- transcribed courtesy CCBN/StreetEvents (www.streetevents.com) -- that XM's sub growth rate beat that of other new technologies such as TiVo (Nasdaq: TIVO), Internet access, cable, and more.

XM's subscriber numbers jumped 361% year-over-year and 34% sequentially, bringing revenue increases of 370% over last year's Q3 and 8% over Q2, and we couldn't find an explanation in the press release or on the conference call for the lower sequential revenue increase versus subscriber numbers. The company expects another 300,000 subs in Q4 with holiday sales adding on to those expected through cars purchased from General Motors (NYSE: GM), Honda, Toyota, Nissan and others that offer XM as factory-installed standard or optional add-on equipment.

From their beginnings, XM and its rival Sirius Satellite Radio (Nasdaq: SIRI) faced two strong doubts: that people would not pay for radio -- even digital quality -- and that radio must be local to succeed. Over a million subs paying $9.95 a month for XM and 150,000 forking over $12.95 for commercial-free Sirius put those fears to rest. And they know that they are each other's only competition. Two big moats around them are that the FCC granted only two satellite radio licenses and that it costs a fortune to get these satellites up and running.

Since Motley Fool Senior Analyst Tom Jacobs pulled apart the two competitors in XM and Sirius Get Busy and Beyond the Price-to-Dream Ratio, XM scored cash from a stock sale to make sure it can launch and replace its ground spare satellite in light of satellite degradation, but Sirius arguably still has the better balance sheet after last year's refinancing that diluted shareholders 92%. Either way, both companies appear to have enough resources to play the game for another couple of years in a race to cash flow positive from operations. But XM's subscriber growth momentum and current 1 million say it may get there first, trumping Sirius' 150,000 subs and likelihood it won't meet its own year-end estimate of 300,000.

Both stocks have rewarded investors in the last year -- 462% for XM and 101% for Sirius -- but what's ahead? Investors are fiercely loyal to their choices here, as much as the famed Intel (Nasdaq: INTC) vs. Advanced Micro Devices (NYSE: AMD) battle, as you can see by checking watching the sparks fly on our XM and Sirius discussion boards!