Well done, XM Satellite Radio (NASDAQ:XMSR). Even though I remain skeptical over satellite radio's ability to produce the fat profits that we were once promised, I have to tip my hat to XM this morning. The company's third-quarter results found net loss narrowing by 36%, to $84 million. XM almost broke even on an adjusted EBITDA basis. Rival Sirius (NASDAQ:SIRI) may be landing more net -- though not necessarily gross -- subscriber additions, but XM is still growing, with revenues soaring 57% higher to $240 million.

The five-year-old radio service also saw its net subscriber base grow by 43% over the past year, to 7.2 million members.

Is XM perfect? Hardly. This morning, it reduced its year-end subscriber target range for the third time. It is now looking to close out the year with between 7.7 million and 7.9 million subscribers. That's troubling, since the addition of Oprah Winfrey's channel in September should have been a major attraction and a potential catalyst for upward revision. Her arrival has helped bring more conventional advertisers on board, like Target (NYSE:TGT) and General Electric (NYSE:GE), but where's her fan base? Come on, Oprah! Get busy on gifting those receivers. At the very least, see what you can do about recommending the 2006 XM annual report to your book club in a few months.

Subscriber acquisition costs also inched higher over last year's showing, though that metric has shown considerable sequential improvement since its marketing-bloated overhead in the holiday quarter of 2005. It's also a misunderstood metric, since most investors fail to realize that the company makes most of its expenses back immediately; the average new subscriber prepays for the first nine months of service.

The company is doing a few things right. It's moving away from costly equipment subsidies, it finally has a marketing campaign worth marketing, and it continues to sign up new distribution partners. This morning, it announced that Cingular -- the popular wireless service formed by AT&T (NYSE:T) and BellSouth (NYSE:BLS) -- will join Alltel (NYSE:AT) in selling an XM-branded mobile music streaming service to its wireless customers.

XM is also sticking to its target of producing positive operating cash flow during the current quarter. That would be a big first step toward validation. Hopefully, it won't be the last.

XM is an active recommendation in the Rule Breakers newsletter service. You're welcome to swing away at Rick with a free 30-day pass to access all of the newsletter's content services including a lively subscriber-only discussion board.

Alltel is a Motley Fool Income Investor pick, while AT&T was a former Stock Advisor pick.

Longtime Fool contributor Rick Munarriz has been a Sirius satellite subscriber since 2004 and an XM subscriber since this spring. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.