Sirius XM Radio (SIRI)

YEAR ENDED DECEMBER 31, 2004 VERSUS YEAR ENDED DECEMBER 31, 2003

For 2004, SIRIUS recognized total revenue of $66.9 million, compared with $12.9 million for 2003, a 419% year-over-year increase. This $54.0 million increase in revenue was driven by a net increase in the company’s subscriber base of 882,197 subscribers, or 338%, from December 31, 2003 to December 31, 2004.

The company’s adjusted loss from operations increased by $126.1 million, to $(456.2) million for 2004 (refer to the reconciliation table of loss from operations to adjusted loss from operations). This increase was driven in part by $98.8 million of increased subscriber acquisition costs, as SIRIUS’ gross subscriber additions exceeded last year’s additions by over 730,000 subscribers.

In addition, programming and content expenses increased by $33.7 million, to $63.9 million for 2004, from $30.2 million for 2003. The increase in programming and content expenses was primarily attributable to an increase in costs to create, produce and acquire content, specifically costs associated with sports related programming initiatives, such as the NFL.

Sales and marketing expenses also increased by $33.1 million, to $153.9 million for 2004, from $120.8 million for 2003. The increase in sales and marketing expenses was primarily a result of increased media advertising to market the SIRIUS service and the NFL season coverage, costs associated with the expansion of the company’s retail distribution channel, including the company’s national rollout in RadioShack stores, and personnel-related costs to support the continued growth of the company.

Finally, the company incurred increases in general and administrative expenses, and engineering, design and development expenses. General and administrative expenses increased by $7.8 million, to $44.0 million for 2004, from $36.2 million for 2003, primarily as a result of overhead expansion to support the continued growth of the business, offset in part by a legal settlement in 2003 associated with the termination of a contract with the company’s prior subscriber management provider. Engineering, design and development expenses increased $6.0 million, to $30.5 million for 2004, from $24.5 million for 2003. This increase was primarily attributable to additional personnel-related costs to support research and development efforts, and costs associated with tooling and manufacturing upgrades at DaimlerChrysler and Ford in preparation for SIRIUS factory installations, offset in part by reduced chipset development costs.

SIRIUS reported a net loss applicable to common stockholders of $(712.2) million, or $(0.57) per share, for 2004, compared with a net loss applicable to common stockholders of $(314.4) million, or $(0.38) per share, for 2003.

SIRIUS maintains a strong cash position, ending 2004 with $759.2 million in cash, cash equivalents and marketable securities compared to $550.0 million on December 31, 2003. The increase in cash, cash equivalents and marketable securities was primarily a result of offerings of the company’s common stock and convertible notes for net proceeds of $614.4 million and the addition of 986,556 gross new subscribers from whom approximately nine months of prepaid revenue was received upon activation. Such increases were offset by cash outflows to fund the company’s adjusted loss from operations, capital expenditures and purchases of restricted investments in 2004.

(Selected financial information follows).

SIRIUS defines adjusted loss from operations as loss from operations before depreciation expense and equity granted to third parties and employees. SIRIUS believes adjusted loss from operations is useful to investors because it represents operating expenses of the company excluding the effects of non-cash items.

SIRIUS defines average monthly revenue per subscriber, or ARPU, as the total earned subscription revenue and activation revenue during the period, over the daily weighted average number of subscribers for the period.

SIRIUS defines subscriber acquisition costs, or SAC, as costs of incentives for the purchase, installation, and activation of SIRIUS radios, as well as subsidies paid to radio and chip set manufacturers, automakers and retailers and the negative margin on equipment sales.

Adjusted loss from operations, ARPU and SAC are not measures of financial performance under U.S. generally accepted accounting principles. As a result, these metrics may be susceptible to varying calculations; may not be comparable to other similarly titled measures of other companies; and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with U.S. generally accepted accounting principles.

Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions, future events or performance with respect to SIRIUS Satellite Radio Inc. are not historical facts and may be forward-looking and, accordingly, such statements involve estimates, assumptions and uncertainties which could cause actual results to differ materially from those expressed in any forward-looking statements. Accordingly, any such statements are qualified in their entirety by reference to the factors discussed in the company’s Annual Report on Form 10-K for the year ended December 31, 2003 filed with the Securities and Exchange Commission. Among the key factors that have a direct bearing on the company’s results of operations are: the company’s dependence upon third parties to manufacture, distribute, market and sell SIRIUS radios and components for those radios; the unproven market for SIRIUS service; SIRIUS’ competitive position; changes to our business plan or strategy and any events which affect the useful life of the company’s satellites.