The good: The satellite radio company posted one of its strongest third quarters ever, reporting $104 million in net income, or 2 cents a share, on revenue of $763 million — up 6 percent from last year. And that was a penny better than Wall Street predictions.

The bad: Sirius added just 334,000 new subscribers in the third quarter, well below analyst’s expectations of as many as 400,000.

So, a significant shortfall. That said, it doesn’t seem to have caused Sirius to alter its subscriber guidance at all. During the last quarter, it raised it to 1.6 million net adds, and during a conference call Tuesday, CEO Mel Karmazin said that forecast still holds.

“We’ve added 1.16 million new net subscribers so far this year compared to 1.09 million in the first 9 months of 2010, a 6 percent increase over last year,” Karmazin said. “And our second quarter — on our second quarter earnings call, we raised our subscriber guidance for the year to 1.6 million net adds, which we expect to meet. This means, we anticipate adding about 440,000 net subscribers in the fourth quarter, up about 34 percent from subscriber growth in the fourth quarter of 2010.”

In other words, subscribership remains at an all-time high and the growth trend is strong enough that Karmazin feels the company can still hit its target.

That should be an easy thing to pull off, particularly if the company manages to renew its deal with Howard Stern, whose contract expires at the end of the year. But it hasn’t done that yet, according to Karmazin. “We had hoped that prior to this call we would have an update on the status of Howard Stern with Sirius XM,” he said this morning. “We do not have any update today, other than to say discussions continue.”

That’s what Sirius XM Satellite Radio (SIRI) CEO Mel Karmazin had to say during the company’s second-quarter earnings call this morning, and he had good reason to say it. With the winds of an improving economy and increasing auto sales at its back, the company turned in another decent financial performance, posting a profit of $15.3 million, breaking even on a per-share basis, compared with a year-earlier loss of $159.6 million, or four cents a share. Revenue rose 18 percent to $699.8 million.

Analysts had expected the company to break even on revenue of $690 million.

Sirius added 583,249 subscribers in the second quarter, ending it with some 19.5 million–up 6 percent over last year and a record high.

Just about this time a year ago, Sirius XM Radio was up a certain creek with nary a paddle in sight. Its shares were trading at around 35 cents, it was hemorrhaging money, and anemic car sales had just led it to post its first-ever decline in net subscriber additions. The company ended its June 2009 quarter with 18.6 million subscribers–up 3.5 percent from a year earlier but down 404,000 subscribers from the preceding quarter. And though it added 1,338,961 new customers, Sirius lost 1,743,383.

Which makes the satellite-radio operator’s announcement of a nice spike in subscribership today all the more sweet.

Sirius (SIRI) said this morning that it added 583,000 net subscribers in the second quarter, bringing total subscribership to 19,524,448–a new record. And with that as a backdrop, the company raised its forecast for net subscriber additions for the third time, boosting this year’s projected growth to 1.1 million subscribers from 750,000.

“Our subscriber results mark the best quarter of gross additions, deactivations and net additions since the merger of Sirius and XM in July 2008,” CEO Mel Karmazin said in a statement. “The strong execution in both adding subscribers and retaining them resulted in our record-high 19.5 million subscriber milestone, despite continued economic uncertainty. The further improvement in our guidance reflects the attractiveness of satellite radio but maintains a cautious outlook for continued improvement in the economy.”

Analysts polled by Thomson Reuters had expected the company to break even on revenue of $671 million. Sirius added 171,441 net subscribers during the period and reiterated its view that it expects to add more than 500,000 subscribers this year.

With quarterly net subscriber additions of 171,441, Sirius (SIRI) ended March with 18,944,199 subscribers. Quite an improvement over the year-ago quarter, when it lost 404,422 subscribers.

“Continued positive subscriber growth, double-digit growth in revenue, and a sharp focus on costs resulted in the highest quarterly adjusted operating income in the company’s history,” Sirius CEO Mel Karmazin said in a statement. “The continuing recovery of the automotive sector and expanding signs of increased consumer spending are encouraging signs for the company’s growth prospects.”

Still more good news for the company, which last week avoided delisting from Nasdaq. That said, at $1.14, Sirius shares are trading down 7.32 percent this morning. Evidently, the revenue miss didn’t go over too well with investors.

An ominous threat, but one not likely to be carried out. Sirius said back in February that it would appeal such a delisting notice and seek an extension from Nasdaq, and that’s exactly what the company is doing.

In a press release announcing the notice, Sirius said it will request a hearing before a Nasdaq Listing Qualifications Panel and petition it for a continued listing pending its return to compliance (SatWaves has a good overview of how this will play out). And the company seems quite confident it will get the hearing.

“SIRIUS XM is one of the most liquid securities on The NASDAQ Global Select Market,” Sirius CEO Mel Karmazin said in a statement. “We have a large investor base consisting of both individual and prominent institutional stockholders; and our equity capitalization is greater than approximately 92 percent of the companies listed on The NASDAQ Global Select Market. We are committed to remaining listed on The NASDAQ Global Select Market.”

Frankly, with over 3.7 billion shares outstanding, there’s little reason to fear Sirius will be booted from Nasdaq. And if you do harbor such fears, consider this: A few days ago the exchange added Sirius to its Nasdaq Q-50 Index, which, according to the release announcing it, “is designed to track the performance of the 50 securities that are next in line to replace the securities currently included in the NASDAQ-100 Index.” If Nasdaq were truly preparing to delist Sirius, why would it bother adding the company to the Q-50?

Why? Well, sentiment about the company and its prospects are clearly improving now that it has its finances in order. The unexpected increase in subscriber growth the company recently reported is obviously helping as well. Also presumably fueling the rally is increasing confidence that Howard Stern will stick with Sirius, rather than bail for terrestrial radio when his contract expires next year. Beyond that, I’m not entirely sure.

In any event, it seems there’s no longer a need for a reverse stock split to push Sirius above the $1 per share minimum for Nasdaq trading.

At a roundtable event this morning at The Paley Center for Media, Sirius (SIRI) CEO Mel Karmazin was asked that very question. Does he worry about Stern leaving for an outfit–like Pandora–looking to avail itself of the same “Stern Effect” that spiked Sirius’s subscriber rolls?

Karmazin acknowledged that while it’s a possibility, he’s dubious. “I think it’s great to be content today,” he said. “In this world of fragmentation, great content prevails. Howard Stern is great content. Howard would be sought after by anyone. He’s a great talent. Having said that, we would like him to stay with us and we are optimistic that he will continue to do so.”

It’s worth noting that Karmazin, while he does view Internet radio as a competitor, doesn’t seem too worried by it. “There are a lot of choices for audio content,” he remarked. “And obviously, the Internet is one of them. But the question is who’s going to the the largest player? And I think that’s our spot to lose. I believe we will be the most profitable of audio content choices.”

Further Notes From the Event

On Amazon’s Kindle:
I am addicted to my Kindle. I saw Jeff Bezos in Sun Valley recently [and] I told him I have personally bought a dozen to give as gifts.

On Comcast/NBC Universal:
I dont’ see anything anticompetitive about what Comcast is doing–the review should take a few weeks. Either you accept the fact that there’s a lot of competition out there, or you don’t….But I do think this thing is going to drag out like it did for us. So far there are only two congressional hearings on Comcast/NBC. We had four–there were fewer for the Exxon Valdez.

On In-Car Internet and the Apple iPod:
I think the Internet will absolutely be in the car and we think it will be a good competitor. You know we’ve been competing with iPods for a long time. And we look at how sat radio performs in the vehicles where people have the ability to put an iPod jack in and we don’t see much of a difference. We believe them to be complementary.

Stern said today that he has been approached by several “regular” radio execs about returning to his original turf when his five-year $500 million contract with Sirius XM (SIRI) expires.

“I actually have an offer,” Stern said, according to a report on The Wrap. “Well, not a bona fide offer, but people have been making them.”

Stern’s remarks today follow a public call-and-response negotiation with Sirius CEO Mel Karmazin that began last fall. “It will start with Howard feeling that he is working too hard and doing too many shows and not making enough money,” Karmazin told attendees of the Reuters Media Summit in November. “Our side would say, ‘We want you to do more, and get less money.’ The hope would be that we would come out with Howard staying with our service.”

Stern, of course, is angling for the exact opposite. “I don’t think I’m going to be re-signing. I know exactly what I want to do here,” he said last year, referring to a less busy schedule. “And I don’t know if it would interest [Sirius.]“

Given the size of Stern’s audience and the availability of much of Sirius’s other content on the Internet, my guess is that it would.

Consider this: For the satellite radio company’s current quarter, RBC Capital Markets expected Sirius (SIRI) to add 49,000 new subscribers. At the time it was issued, that projection was described as “cautiously optimistic.” And it was…far too cautious. Because after market close Tuesday, Sirius said it added 257,028 net new subscribers in the fourth quarter–the most since the third quarter of 2008.

The company ended the year with 18,772,758 subscribers. Now that’s not the 20.6 million for which CEO Mel Karmazin had been hoping, but it’s impressive nonetheless and suggests that Sirius may indeed be turning the corner. Further evidence: The company also said it will report more than $100 million in free cash flow for the full year. This, after posting negative free cash flow of $552 million in 2008.

Karmazin credits some of his sales success to a new ad campaign. I guess he has to say that inasmuch as he approved the campaign, but I have a hard time believing it. I’ve seen this ad several times, but until I read this interview, I had no idea it was for Sirius (SIRI):

Meanwhile, maybe it’s just self-interest/projection, but I was struck by the fact that Karmazin seemed to go out of his way to tell the Reuters staff how little he thought of it.

Or maybe he was talking about journalists in general: After being greeted by a dozen Reuters reporters at the company’s Global Media Summit,” Karmazin declared that if he was running the news service, only one of them would be employed.

Here’s Reuters media reporter Robert MacMillan’s account of the exchange, via Twitter:

“There would be no question that I would be perfect to run it,” Karmazin said. “But there is no chance that I will ever take another job outside of Sirius XM. I just renewed my contract. It’s exactly what I want.”

Exactly what he wants, except maybe for that perennially-under-a-dollar share price–though according to Karmazin, that’s going to change. “I think today, you’ll start to see quarter after quarter of growth,” he said. “You’ll see us making free cash flow. You’ll see us with…over $2.5 billion of revenue. We’ll start to make money, and we’ll start to keep investing in content. And I think our future will be great.”

Unassuming guy, that Karmazin…

Absent one-time charges, the company broke even for the quarter. Analysts had been expecting a two-cent loss on revenue of $609 million.

Good news, but it was tempered with a bit of bad. Because Sirius’s (SIRI) subscriber growth is slowing. The company ended the quarter with 18.5 million total subscribers. That’s up 103,000 from the second quarter, but down 2.1 percent from a year earlier.

“We are very pleased with what we accomplished during the third quarter, especially when considering the macroeconomic issues affecting consumers and the auto industry,” Sirius CEO Mel Karmazin said in a statement.

“We managed to grow revenue, grow ARPU, reduce operating costs, increase adjusted income from operations significantly, and refinance higher cost debt,” Karmazin added. “We look forward to continuing this performance. We grew subscribers and improved churn in the quarter, and we are well positioned to take advantage of an economic rebound. We expect to grow subscribers, revenue, and cash flow next year regardless of the magnitude of any recovery.”

During a call with analysts Thursday to discuss second-quarter earnings, Sirius CEO Mel Karmazin said the app, which is currently the iTune App Store’s fourth most popular app in the music category and the 88th most popular overall, was intended more as a means of tempering subscriber churn than a means of driving new subscriptions.

“…unlike an awful lot of applications on the iPhone…we’re not offering free service,” Karmazin said. “What we are offering is the free download and a week’s trial, so this was never designed that we believe we were going to get a significant number of new subscribers. We are seeing an increase in the number of subscribers who are signing up for the $2.99 fee, to be able to stream the product in addition to having it, so a satellite radio subscriber who also has an iPhone is now able to do that with an incremental $2.99.”

So the app is bringing in some new revenue. How much isn’t clear though, since Sirius doesn’t break iPhone app numbers (subscribers or revenue) out. Karmazin admits, however, that it’s not much. “You should not consider them to be a very significant number related to our number of subscribers,” he said, adding, “It’s the right thing for us to do, we continue to believe in it, we’ll continue to do more of these things.”

During a call with analysts Thursday to discuss second-quarter earnings, Sirius CEO Mel Karmazin said the app, which is currently the iTune App Store’s fourth most popular app in the music category and the 88th most popular overall, was intended more as a means of tempering subscriber churn than a means of driving new subscriptions.

“…unlike an awful lot of applications on the iPhone…we’re not offering free service,” Karmazin said. “What we are offering is the free download and a week’s trial, so this was never designed that we believe we were going to get a significant number of new subscribers. We are seeing an increase in the number of subscribers who are signing up for the $2.99 fee, to be able to stream the product in addition to having it, so a satellite radio subscriber who also has an iPhone is now able to do that with an incremental $2.99.”

So the app is bringing in some new revenue. How much isn’t clear though, since Sirius doesn’t break iPhone app numbers (subscribers or revenue) out. Karmazin admits, however, that it’s not much. “You should not consider them to be a very significant number related to our number of subscribers,” he said, adding, “It’s the right thing for us to do, we continue to believe in it, we’ll continue to do more of these things.”

The company’s shares spiked, rising about 20 percent to 54 cents on news of the government’s expanded “Cash for Clunkers” program and the positive impact it should have on new car sales and, by extension, new Sirius subscriptions. That analysts had been predicting a second-quarter loss for the satellite radio company, along with the loss of thousands of subscribers, did little to temper enthusiasm. Though it seems to have done so today, now that those predictions have proven true.

Reporting second-quarter earnings this morning, Sirius posted a net loss of $157.3 million, or four cents a share on revenue that rose one percent to $590.8 million. Excluding one-time charges, though, Sirius lost only a penny a share, matching analyst estimates.

As analysts had foreseen, subscriber count slipped again. Sirius ended the quarter with 18.4 million subscribers–a one percent drop from a year ago. All told, the company lost 185,999 net subscribers during the period. And that’s prior to the addition of a $2 royalty fee.

Looking ahead, the satellite radio operator raised its outlook for the year, cautiously optimistic that the car sales that drive subscriptions will pick up in the second half of this year.

“Based on these results we are increasing guidance again and expect to exceed over $400 million in adjusted income from operations during 2009,” CEO Mel Karmazin said in an earnings release. “Growing our revenue in the face of broad declines in the advertising and automotive markets is a remarkable accomplishment, and we are well positioned for a rebound in auto sales.”

Shares in Sirius are trading down 7.41 percent at 50 cents as I write this, which is still 10 times their 52 week low. And, to be fair, they are up almost 10 cents in last 10 trading days and up about 320 percent year-to-date.