XM shares up 6%: Why the excitement?

XM Satellite Radio Holdings Inc. (NASDAQ: XMSR) shares are up over 6% to $11.68 after the company reported earnings early today. XM reported a narrower loss of $122.4 million, or 40 cents per share, versus a loss of $151.4 million, or 60 cents per share, in the year-ago period. Revenues came in at $264.1 million, up 27%. Analysts had expected a loss of 41 cents per share according to Reuters.

XM finished the quarter with 7.9 million subscribers, up from 6.5 million a year ago. While this may seem like a nice increase in subscribers, it's far from the original forecast the company gave of 9 million subscribers. Still, XM is deemed to be better positioned than its once rival, now potential buyer, Sirius Satellite Radio, Inc. (NASDAQ: SIRI), as it has more partnerships with car companies, including Toyota and GM. The company now expects 9-9.2 million subscribers by the end of 2007.

But most metrics aren't boding good things for XM. Churn rate in the first quarter increased somewhat, conversion rate of subscribers after a free trial declined and net subscriber additions were nearly halved compared to a year ago with over half a million subscribers lost. Subscriber acquisition costs also increased and are expected to grow even more.

Ever since Sirius and XM announced the planned merger, shares of the two companies have been hit hard as they wait regulatory approval, which may never come. YTD, SIRI shares are down 16.7% and XMSR shares are down 19.9%. Since the planned merger was announced, shares are down 18% and 10.4% respectively.

Looking ahead, XM said revenue for the year should be around $1 billion -- analysts were looking for $1.14 billion -- and reiterated that it will be cash flow positive in 2008.

I'm sorry, but I don't see what the excitement is all about. It may be that the stock was heavily pounded lately and as investors digest the possibility the merger will never be approved, they start evaluating the company on its own merits again. Which are...