Sirius Stumbles

By design, Sirius Satellite Radio (NASDAQ:SIRI) is a money burner -- just like bigger competitor XM Satellite Radio (NASDAQ:XMSR). The problem for Sirius is that it's burning cash quicker than anyone imagined.

This quarter's earnings release revealed revenues that came in a tick below analysts' estimates and a loss that also exceeded the Street's expectations. The $13.2 million on the top line looks a lot better than the $2.1 million in the prior-year quarter. But remember that this company carries a market cap of $3.23 billion.

Sirius's second-quarter per share loss of $0.11 looks slimmer than last year's second-quarter loss of $0.12, but keep in mind that there are 33% more shares outstanding now thanks to heavy stock issues needed to raise cash to keep the signal coming. The real loss was 23% wider: $137 million vs. $111 million.

As usual, management and Sirius die-hards are going to crow about distribution deals with Ford (NYSE:F), DaimlerChrysler (NYSE:DCX), Best Buy (NYSE:BBY), Circuit City (NYSE:CC), and Wal-Mart (NYSE:WMT). They're also going to point to record subscriber additions this quarter. The firm added 129,000 to the rolls. Looks nice, but that's chicken feed next to the 418,000 XM had put on during the same period. Consider that Sirius's total subscriber base is only half a million.

And Sirius is not only losing more money as it grows, but it's also paying more for the privilege. The firm spent $76 million -- almost six times subscriber revenues -- on marketing and subscriber acquisitions. Divide the $76 million by the new subscribers, and the firm laid out an incredible $590 per newcomer, 40% more than last year. Those pairs of ears need to stay on board for almost five years before Sirius can break even on the cost of attraction alone.

There will be screaming today about quality and content. Maxim radio. Eminem. Tony Hawk? Blah, blah, blah. Quality -- if that's what this is -- doesn't always win.

Here's what should matter to you as a shareholder: Not counting depreciation or stock-based compensation, operating expenses and interest cost Sirius around $170 million so far this year, and the price tag has been growing. Sirius has $640 million in cash. How long before the firm needs to pull more stock off the dispenser? When will the firm ever break even? What are you willing to pay for the wait? You do the math.

For more Fool coverage of satellite radio:

• Is Sirius seriously misunderstood?
• Should you put your bets on XM?
• See Sirius flirt with the NRA.

Fool contributor Seth Jayson looks forward to misspelled email and threats from the Sirius partisans. No matter how loudly they scream "your [Sic] just short," he has no position in any firm mentioned above. View his Fool profile here.