Sirius XM Radio Inc posted higher quarterly revenue on Thursday, despite a reduction in subscribers, and raised its income outlook, citing cost cuts and a potential rebound in automobile sales.

The company, which earlier this year secured financing from John Malone's Liberty Media Corp to stave off looming debt problems, said subscribers to the pay-radio service declined by some 186,000 from the first quarter, better than many analyst expectations.

Shares of Sirius XM, which had risen sharply in the days ahead of the report, slipped 9 percent after it reported that it ended the period at 18.4 million. It attributed the quarterly decline to weakness in auto industry sales.

Proforma revenue rose 1 percent to $607.8 million, on par with analysts' views. The proforma figures reflect the fact that Sirius completed its purchase of rival XM Satellite Radio last July and compare the results as if they were a single company a year ago, also making some accounting adjustments for the transaction.

Net loss attributable to common shareholders for Sirius XM, home to programs by Howard Stern and Oprah Winfrey as well as Major League Baseball, was $157.3 million or 4 cents a share.

Excluding special items the loss was 1 cent a share, matching analysts estimates, according to Reuters Estimates.

In the quarter, Sirius also trimmed subscriber acquisition costs to $57 per gross subscriber addition from $71 in the year ago quarter.

It raised its 2009 outlook for adjusted income from operations to more than $400 million, fueled by accelerated cost cutting. It was the second time it lifted the forecast, after raising it in May to $350 million from $300 million.

We think the stronger subs performance, as well as better-than-expected profitability, in the quarter, suggests this number should be attainable, J.P. Morgan analyst Lev Polinsky said in a note to clients.

The outlook improvement comes as more subscribers to Sirius, which gains most of its new users from radios built into cars, sign up for premium programing packages and on higher prices for users with multiple subscriptions.

In addition, churn, a measure of the number of customers who quit the service, declined.

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, Mel Karmazin, Sirius XM's chief executive, said in a statement, referring to signs of rising demand in the beleaguer auto industry.

Shares traded at 51 cents each in premarket after falling as low as 49 cents earlier. The stock closed at 54 cents on Nasdaq on Wednesday.

The stock has climbed 36 percent over the past three months and more than tripled this year, fueled by optimism about new revenue streams, the launch of its iPhone software and the cash for clunkers car buying program.

(Reporting by Franklin Paul, editing by Gerald E. McCormick and Maureen Bavdek)

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