A Sour Note From XM

If this is XM Satellite Radio's (Nasdaq: XMSR) last quarter as a stand-alone company, we can't say the company went out with a bang.

Revenue climbed 17% higher to $308.5 million during the first quarter, as its loss widened slightly to $0.42 a share, compared to a $0.40 deficit a year earlier. XM fell short of analyst expectations that called for a loss of just $0.39 a share on $313 million in revenue.

XM continues to make inroads as a provider of auto factory-installed receivers, though it continues to fade in the retail space. The company closed out the period with 303,000 more subscribers than it started with -- enough to top the 9.3 million mark -- but it also lost more retail subscribers than it gained. In other words, XM is winning the war in the showroom but losing the battle inside Best Buy (NYSE: BBY).

The wider loss is also a letdown since XM had managed to narrow its deficit in five of the six most recent quarters.

This morning's numbers aren't all bad, though. The company's conversion rate -- which has hovered between 51% and 53% of new car buyers who keep paying for their subscriptions once the free trials run out -- bumped up to 53.3%. Churn was also kept in check at 1.8%.

When you lump XM's growth with the numbers that Sirius Satellite Radio (Nasdaq: SIRI) is likely to report later today, you see an industry that is clearly gaining in popularity, in terms of an indispensable car radio upgrade.

That will give the combined company welcome momentum as XM and Sirius complete their merger. But when will that be? Well, who knows at this point? The deal won Department of Justice approval two months ago. The FCC still has to rule, but it is generally portrayed as more deal-friendly than even the Justice Department.

There have already been enough deals in the radio world that have come undone all on their own -- Cumulus (Nasdaq: CMLS) and Clear Channel (NYSE: CCU) being a prime example. The last thing the industry needs is for regulators to get in the way of a deal that makes sense for both consumers and the combining companies.

Patient investors have been waiting for 15 months since the deal was announced. One way or another, it's highly unlikely that the FCC will wait another three months before rendering its decision. If this is XM's final quarterly report as a public company -- and that's clearly not a given, even if the FCC gives its nod, since XM and Sirius need to finish the financing to make their merger happen -- it's a shame that the company didn't go out on a higher note.

Recent stories on XM's long courtship with Sirius:

• Why Does Goldman Hate XM?
• Before XM Kisses Sirius
• Satellite Radio Hands Out Appetizers