SIRIUS SIGNS 421 FIRST-QUARTER SUBSCRIBERS—CLAYTON

Roster of 421 subscribers seemed paltry in light of huge fanfare given recently to commercial launches by Sirius and its rival XM Satellite Radio. But Clayton told analysts “I will remind you that this only includes the first 5 to 6 weeks of sales in extremely limited zip codes” in 4 test markets of Denver, Houston, Jackson, Miss., Phoenix. “Except for very limited initial promotional support in those markets, we have not done any additional advertising pending our national launch, and this will be the case through most of the 2nd quarter.” Additional subscribers in April-June quarter are expected to number “only several thousand,” Clayton said: “The clock really starts ticking for us on July 1” with start of national service availability, kickoff of national ad campaign and “improved” receiver availability. “Then it’s a whole new ball game for Sirius Satellite Radio.”

Clayton said accelerated national rollout schedule was moving forward “according to plan.” Company will activate service in 10 additional states this week, increasing total to 28, growing to 38 by June 1, with remaining markets “going live” by July 1 target. Subscriber numbers will “start off slow” but are expected to grow “substantially” in year’s 2nd half and “especially in the 4th quarter, once we have nationwide coverage and additional product on the retail shelves.” Company still believes it can meet analysts’ consensus estimates of 100,000- 150,000 subscribers by year-end, Clayton said. Long-term goal is to secure “solid” distribution agreements with automotive partners while also driving subscription growth through aftermarket retail channels, he said.

New agreement with Daimler Chrysler announced Tues. will make Sirius radios widely available as dealer-installed option through Mopar parts division starting in fall, Clayton said. Deal also boosts specter of Sirius radios’ emerging as significant factory-installed option on Chrysler cars, also starting in fall. CFO John Scelfo told analysts latest agreement with Daimler Chrysler included new financial arrangements that he wouldn’t disclose. In addition to Detroit-area office to service Daimler Chrysler and Ford accounts, Clayton said Sirius was opening Irvine, Cal., office to service Asian-based automakers. European automakers will be serviced through Sirius N.Y.-based hq, he said. Clayton said Sirius was talking with other OEM partners on timing of their introduction plans.

Clayton said Sirius was on schedule to have receivers available on 3,500 retail floors by July 1 national rollout. On mass merchant front, he said, Sirius and Recoton had agreed to provide live feeds, signage and Jensen-brand receivers to Wal- Mart. But Sirius also is embracing independent specialty audio and satellite TV retailers, he said: “This category of dealers was a strong component in the growth of satellite TV, and we firmly believe they can generate similar results for Sirius. Through this distribution channel, we will target the same consumers who were once video-starved and who are now still audio-limited.” Channel represents 5,000-10,000 accounts and is “an untapped source of additional subscriber growth” starting in 2nd half, Clayton said. To service that channel, Sirius has signed distribution agreement with DSI Corp., which sells RCA CE products to independents.

Ramping up receiver production “continues to be our biggest challenge,” Clayton said. He said Kenwood was “redoubling” efforts to produce sufficient quantities of receivers, with target of 30,000 Kenwood units placed at retail by July 1 national rollout and more than 100,000 by year-end. More than 30,000 Jensen-branded receivers have shipped so far, and 80,000 will be available at retail by Dec. 31, he said. Clarion continues to focus on independent specialist distribution. Total receiver availability will ramp up to 300,000 by year-end, Clayton said. Big question mark is Panasonic, which was to have been key producer of Sirius radios from plant in Peachtree City, Ga. In Q&A, Exec. Vp Guy Johnson said Sirius was nearing completion of restructured agreement dating back to 1999 that should promote availability of Panasonic receivers for late 2002.

Sirius said first quarter loss applicable to common stockholders grew to $90.12 million (-$1.22 per share) vs. year- earlier loss of $64.42 million (-$1.34) on $33,000 in revenue vs. none year earlier. Sales and marketing expenses jumped to $15.66 million from $4.97 million. Scelfo told analysts that subscriber activation costs, which were grouped under sales and marketing expenses, averaged $178 per subscriber and were within range of meeting analysts’ consensus projection of $155 for year. In cost-cutting move, Scelfo said company had abandoned one floor of its hq near Manhattan’s Rockefeller Center and had consolidated staff into 2 remaining floors. If additional space is needed, it will be found in other, less expensive N.Y.C. locations he said. Moves are expected to save Sirius $2 million annually on its N.Y.C. rent, he said.