February 9, 2006
XM signs 3-year deal with Oprah Winfrey
By Derek Caney
NEW YORK (Reuters) - XM Satellite Radio Holdings Inc. on Thursday said it signed a three-year, $55 million deal with Oprah Winfrey to introduce a channel on the top U.S. subscription radio service, sending shares up 9 percent.
XM's smaller rival in the U.S. satellite radio market, Sirius Satellite Radio Inc., has already inked a number of high-profile deals, most notably a five-year $500 million contract with shock radio personality Howard Stern.
"It's a smart strategic move for XM because they need to answer the Howard Stern question," said Stanford Financial Group analyst Frederick Moran. "It's not a dirt cheap deal. But it does help XM attract a female audience."
XM shares have slid over the last three months on concerns of slower growth from the auto sector, which has been the engine of growth for satellite radio, Moran noted. "This is the kind of deal that could rekindle enthusiasm and stimulate sales later this year."
XM said the Oprah deal will not affect its target to break even on a cash flow basis by the end of this year. The company, which currently has more than 6 million subscribers, said its goal to reach 9 million subscribers by the end of the year is also unchanged.
Sirius, by comparison, has more than 3 million subscribers.
Shares of XM rose $2.30, or 9 percent, to $26.91 in premarket trading on the Inet electronic system. Sirius shares rose 1 cent to $5.99.