Maybe it really is time to get serious about Sirius (NASDAQ:SIRI). This morning, the runt of the satellite-radio duopoly posted impressive sales and subscriber gains during its second quarter. Specifically, Sirius booked $52.2 million in revenue, besting Street estimates of $50.1 million, and grew its subscriber base to 1.81 million, up 25% sequentially and 278% year over year.

The improvements allowed Sirius to up its guidance for the third straight quarter. The company now expects to book $225 million in sales for fiscal 2005 -- $10 million better than prior estimates -- and end the year with 3 million subscribers.

No doubt that makes for good copy, especially for the Sirius cheerleaders. But it's worth noting that the gains carried a cost: Sirius' net loss widened to $178 million from $137 million during the year-ago period. That's hardly chump change.

Indeed, widening losses ought to be a cause for concern among investors. After all, Sirius has been burning cash from the beginning; it used another $65 million to fund operations in Q2. While that alone isn't terrible, I find it interesting that the company is going back to the well for more debt financing -- $400 million this time. Sirius said in a statement that the proceeds will be used to redeem high-interest debt and for "generalcorporate purposes." I added the emphasis because a check of the balance sheet shows that roughly $60 million of its debt would be refinanced, if we take the announcement at face value. The rest would be used to help keep the doors open.

Don't get me wrong: I'm actually reasonably high on Sirius. Year-over-year improvement in gross margin alone (a 78% loss last year versus a 38% gain this year) shows the incredible leverage built into the business model. Heck, the extra $40 million Sirius lost year over year gets a whole lot smaller if you strip out the $29 million (over and above the comparable quarter's offerings) the company spent granting equity to third parties and employees. Furthermore, on a common-sized basis, all income statement line items declined as a percentage of revenue.

Yet I'm also painfully aware of the way Mr. Market's hordes react to Sirius. They expect too much, because Sirius is, in my own opinion, waaaaaay overhyped. And therein lies Sirius' fundamental flaw, Fool. Expectations are so sky-high that no amount of good news is enough. Sure, there are other issues, such as its debt and valuation. Even its lame-o insurance policy deserves some skewering.

Bottom line: The cost to acquire subscribers is still prohibitive, and that's going to hold down earnings -- at least for a while. So long as that hangs over Sirius' head, no amount of good news will satisfy investors' exalted expectations.

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Fool contributor Tim Beyers hates satellite TV too much to ante up for satellite radio -- for now, at least. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what's in his portfolio by checking Tim's Fool profile, which is here. The Motley Fool has an ironclad disclosure policy.