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Don't Believe Everything You Hear About Sirius

by: Brandon Matthews September 17, 2008 | about stocks: SIRI    

Brandon Matthews

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It all started with a remark or two from Mel Karmazin at the recent Merrill Lynch media conference. I wrote that day exactly what it was Mel had done wrong, in this meeting of media moguls, and Mel was nice enough to apologize for his flippant remarks in an interview one week later with the Wall Street Journal.

As I troll through the barrage of news stories relating to satellite radio, it has dawned on me that perhaps the most damaging comment from Mel has not been addressed. He said that “regular radio sucks” as an investment. The problem with this statement is that regular radio is owned primarily by NAB controlled, traditional media companies. The recent negative bias seems to be nothing less than a smear campaign designed to destroy confidence in Sirius XM (SIRI).

And it’s working. Even the strongest supporters of Satellite Radio seem stuck on this issue of debt due next year, and their confidence in the product and company is being destroyed. They have created a fear and doubt scenario that has become the focus of Sirius XM. New products and programming, analyst buy ratings and reaffirmations,  and great new pricing options are doing little to affect this negative sentiment.

Every article I read these days mentions at the very least, the 300 million dollars in debt that Sirius XM has coming due in February 2009. Not one of them mentions the plan laid out by Mel & Co. to deal with the issue. Everyone looks at Lehman (LEH) and makes the assumption that liquidity problems in the investment banking sector are a negative for Sirius. Nothing could be further from the truth.

The reason I propose this is that Sirius has made it clear that they first intend to use cash on hand to dispose of the convertible debt obligation. Assuming Sirius was to use 150 million dollars, that would only leave 150 million to dispose of. The company has offered that any shortfalls would be made up of bank loans. There are other options as well. Lines of credit from the OEMs and Loral (LORL) for example. My personal opinion is that more than enough cash will be available when these debt obligations are due.

It seems no one is willing to give the company time to execute on its business plan. A la carte offerings, “best of” programming and even the new navigation systems offer increased incremental income and should greatly improve the company’s liquidity and top line growth well before next February. If I can figure this out, why can’t Wall Street?

The answer, I’m afraid, is in the negative media bias campaign. It looks to me like the NAB is not quite done with their mission to diminish competition, by removing the greatest threat to terrestrial radio’s stranglehold on the American public: Satellite Radio!

Position: Long SIRI, no position LORL

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This article has 142 comments:

  •  
    Sep 17 07:53 AM
    Regular radio does suck!
    Reply
  •  
    Sep 17 08:05 AM
    Today is a good day to breakup!
    Reply
  •  
    Sep 17 08:20 AM
    Thats all every one talks about , sad to say, Like the Old Pet Dog and the end of his life,he gives it that one last fight,poor Puppy-That aboy old Yeller just let go - he gave it his best -just can't compete with the new Dog on the Block,Meet Sirius,,,,,
    od Nab going out an embarrassment now,,hang it up NAB
    Reply
  •  
    Sep 17 08:31 AM
    Good points. Today's other SA article author states that SIRI needs to seek 1B in refi loans--which I don't believe to be true. As you say, since SIRI has about 300M cash, they can put half toward the refi upfront--which will help lower the new debt interest liability. I suspect though that they will also think about including the current May '09 liability in this round of financing--which only then leaves the Dec '09 300M to address an entire year from now (which they could even by then possibly address with cash). As economic times get better next year and the SIRI synergies become more concrete, the subs and top line continuing to grow, etc... they could always even do another refi if they so chose to get an even better rate. For now in the immediate term, freeing SIRI up for an entire year without concern "as a going concern" for investors with one stroke of the pen, will provide the necessary breathing room and immediately rehydrate their market cap--improving their market position even more, attracting more investors, etc...

    Despite the negative reports, which as you say are coming from a variety of sources with their own agendas to want to see SIRI suffer, there are many reasons SIRI is just not on any brink of failing whatsoever. It's interesting that yesterday was the very first public report I've ever seen (seemingly finally by an unbiased party I might add) that highlighted the fact that SIRI, now with their near 20M sub base this year, puts them in the same league as the venerable Comcast.

    "The newly merged Sirius XM is expected to close out the year with 19.5 million satellite radio subscribers. Its target for next year is 21.5 million. To put that number into perspective, the company's subscriber numbers are not far behind those of cable giant Comcast (Nasdaq:CMCSA), which has 24.6 million subscribers."

    Let me just say this about that. Any company that has that kind of consumer reach (as Comcast does), has EXTREME value in the market place--period. Add in the potential yet unrealized uses and growth for the medium itself, and you have a powerhouse. Why do you think Mel did this deal in the first place? For his health? But if nothing else were true, the car OEM's alone would not allow SIRI to fail since they now count on SATRAD as a selling feature staple--both as the feature itself, but also from the sharing revenue they receive from it (which has become a staple on their balance sheets).

    As I have said before on this board, it's just a little time that has been needed to get through the merger process once it finally got done and get things lined up. Life has gotten a little turbulent for SIRI but there is plenty of light at the end of this tunnel. Hang in there longs.

    Btw, I saw that article with Mels "reqular radio sucks" comment. Seemed like minutes later it was gone. I assume SIRI had it pulled asap?
    Reply
  •  
    Sep 17 08:47 AM
    Excellent article, but its not the NAB whos doing the tanking. IMO. But just know this negative media is now obvious to a lot of people, not just little old me. Its TOO obvious, and someone needs to get on the phone at Sirius and start pounding tables.
    Reply
  •  
    Sep 17 08:58 AM
    Regular radio does suck, and suck hard, especially in the Atlanta area. I have all but destroyed the dashboard and radio in my Avalanche from changing stations and turning it off. My radio could be the poster child for the NAB.

    All, remember that the two democrats voted against the merger in the end. If Obama wins, the FCC board will be 3 democrats and 2 republicans. If that happens we can expect them, under the influence of the NAB, to throw everything they have at SIRI to either kill it or bust it up. VOTE REPUBLICAN!!

    Reply
  •  
    Sep 17 09:03 AM
    I wonder what will happen to the price today after yesterdays rally!!?
    Reply
  •  
    Sep 17 09:20 AM
    I cannot believe how many SIRIUS/XM shareholders are sucked into this negative campaign garbage put out by terrestial radio competition.
    Facts are facts,

    SIRIUS/XM is growing every day - Terrestial radio does NOT

    SIRIUS/XM from a negative balance sheet --will become POSITIVE very soon

    SIRIUS/XM is here to stay

    SIRIUS/XM + APPLE + MOTOROLA + DIRECT TV + DISH NETWORK just a few to consider joining forces
    possibilities are endless

    People need to look and stick to the FUNDAMENTS of SIRIUS/XM
    QUALITY PROGRAMMING WILL PREVAIL and this is what SIRIUS/XM
    is working on.
    Reply
  •  
    Sep 17 09:22 AM
    Headed right back down. Bid/Ask just before the open is .83/.84. Yesterday was a mirage...look for an easy retest today at least in the mid .70's...
    Reply
  •  
    Sep 17 09:23 AM
    After 2 years of owning Sirius and listening to Howard every morning, when I'm forced to drive to work listening to the "Whacky Morning Shows" I want to drive my car into on coming traffic. Regular radio sucks, but you know what sucks worse? Having to listen to this crap because I left my Sportster in the boombox. WHERE IS THE NEW TECHNOLOGY???? They had 1.5 years to have this stuff ready to go. I need a new receiver and am ready to plunk down money to get it.

    I hate telling my friends who love my radio to wait to buy one because new technology is on the way to receive both Sirius and XM.
    Reply
  •  
    Sep 17 09:24 AM
    Dont drive into oncoming traffic GotSIRI... plz.

    (lol)
    Reply
  •  
    Sep 17 09:54 AM
    I have not listened to regular radio in 2 years. F U NAB!
    Reply
  •  
    Sep 17 09:55 AM
    Excellent opportunity today to watch a stock manipulation program in action. Watch level 2 streaming quotes on KBH. 3 market trading windows are moving in unison, dropping the bid, raising it, etc.. in step. Of course, if all the trading were not coordinated, this would be a mathematical impossiblity. Also manipulate the ask and bid side. So easy to see with this one, because its desperate. Nothing keeping this stock up other than a bunch of 100 shares being traded back and forth. To quote Cramer...
    "You got yourself a 2 dollar lottery ticket here", trading in the 20's right now, lol. About what KB Homes is worth in real money right now. Only people moving it are the shorts and a few occasional sellers.
    Reply
  •  
    Sep 17 10:03 AM
    Wow, I could prove manipulation in that stock, unequivically, with just 2 print screens. LOL. No way 4 TRADING PLATFORMS move the same ask around, at the same exact moment, dropping it and raising it in unison. That PROVES 4 different entities at least(its really only one computer program) are in collusion of stock manipulation. Wow, open and shut case. There you go unbelievers, please offer an explanation, unbelievers. Markets arent manipulated....program... dont run that control prices....LOL LOL What fools, next your going to tell me that terrestrial radio is a good product, but it should look out for internet radio, THEY WAVE OF THE FUTURE. AHHAHHHAHAHHAHHAL O LOLOLOL I LOVE IT!!! More lies, I want more lies!!!
    Reply
  •  
    Sep 17 10:07 AM
    Watching the program that is running the Sirius stock down is a bit more complicated. Its more of a wall of shorts, designed to make ever up tick a drag. And if buying interest subsides for a moment, its got an avenue to drop it right down again, regarless of real investment interest. This program, whoever is running it, is robbing you of money, and you should be furious. Its not even so much as the negative press so much, is its this manipulation in the trading. I believe theres still enough legitamite sentiment in this stock to where if left alone it would be in the 2-4 range right now, regardless of the bad press. That just kept it under 5.
    Reply
  •  
    Sep 17 10:14 AM
    relmor... where are you watching the level 2 streaming quotes?
    Reply
  •  
    Sep 17 10:16 AM
    Examples of stock that flow normally.....
    Look up a stock trading above 5 dollars that you have never heard of and the media doesnt mention. Pick around 5 of those. Watch them for a few hours each. Come back to Sirius and KB Homes, any large bank...etc...
    Like night and day in the action. Dont say all stocks trade differently, actually they only vary by volume and price, up or down is based on sentiment. All stocks should trade relatively the same. Fill one side move up, etc....to higher or lower ask/bid, etc.... Sometimes you get jumps or gaps, etc... but not every 2 seconds, lol.
    Reply
  •  
    Sep 17 11:20 AM
    oh, my god!
    Reply
  •  
    Sep 17 11:21 AM
    I bought stock in siri in 2001 at $2.20 a share with only 500,000 subscribers and no howard. 7 years later, 19.5 million subscribers later,shares are at 85 cents. Mel you are a misleader. In all these years i've been thinking positive. When shareholders are told be positive. It's a positive gain of 19,000,000 subscribers. No gain,none, for the shareholders for 2555 days (7years). Mel i hope you are enjoying all those big pay checks and pay raises on the shareholders expense. This is a fact. My seven years of dealing with your misleading results, proves that!!!!!!!!!
    Reply
  •  
    Sep 17 11:29 AM
    Wow,... The Nasdaq average is tanking... And bringing SIRI with it

    : (
    Reply
  •  
    Sep 17 11:35 AM
    matt o, I would like to know how you bought in SIRI for 2.20 in 2001. Then why would you not have sold when it went all the way up to 9 +. Next FYI Mel would have made 5 times as much if he did not take a pay cut to come to SIRI. I also dought you have put 10% more then you have earned in salery and bonuses for the last five years back into your companys stock.
    Reply
  •  
    Sep 17 11:41 AM
    after all the negative events and setbacks, shareholders are already uneasy and unsure about siri's viability. even the approval of the merger which rightfully should be considered a win turned out to be a disappointment. the continous decline of pps does not help in boosting shareholders morale. siri management has been reticent in assuring them on the solution of the company's immediate problem. on the contrary, the message/s shareholders gleaned from 'overheard' and secondhand sources are more in line with bashers postings.

    what should shareholders believe if siri management does not talk to them?

    tyler's
    Reply
  •  
    Sep 17 11:51 AM
    163888, nice name. The stock did go to that for such a brief time. Out of those 2555 days, 10-20 days the stock made money, and no I did not sell. for that brief time mel did the right thing. what about the other 2530 days? I guess I should put more faith in go ole Mel.
    Reply
  •  
    Sep 17 12:00 PM
    dumb question,,,,but,,,
    what is the downside of sirixm filing bankruptcy and reorganizing debt free??
    its horrible for the current investors obviously,,buts what to stop them?!? thats my fear...
    Reply
  •  
    Sep 17 12:06 PM
    Bankrupcy gives control over to a third party. Its a last desperate option, as you saw with Lehman Brothers. Buyers would be suitored first. Not even close to bankrupcy. Lehman Brothers went bankrupt because they couldnt convince the government or any other buyers that their business model offered them a way to profitablilty in the near future. In the margin game its not or never. When the government wont bail you out, your done. The government will now decide who lives, and who dies. Who controls the government? Central banks of course. So you have what theve always wanted, consolidation in the banking industry, easier to control the sheeple if they must go to only a few banks, instead of many. Also the bigger the bank, the more they can feel comfortable about a bail out. Bail outs wont stop. They will have to bail out the airline industry, when oil hits 150 again, should be by March of next year, or close to it. Probably 130 again, it overshot this year, but its not far off.
    Reply
  •  
    Sep 17 12:10 PM
    That is not a bad question.163888 try to punch holes into that one. In the past the shareholders have been fried by this company. We are being cooked right now. Is it time to microwave our burnt behinds. Mel?
    Reply
  •  
    Sep 17 12:11 PM
    The only people they wont bail out is you and me. Average Joe, and the small business. They want to keep you in your house because it makes you a slave to it. Also dont look now, but wait till the government makes it illegal to walk away from a mortgage, or it not only hurts your credit, they can go after your other assets , not only taking the house back, but making you financially responsible for the loss of value too. Since they own Freddie and Fannie, and they are one and the same with BOFA and JPMorgan, whats stopping them? Nothing thats what. Your vote? LOL LOL LOL
    Your vote hasnt counted since 1776. Democrat or Republican? What a joke, I ll take neither thank you. Both want to rob me, just in different ways. Ron Paul or bust. Vote no confidence, like Jessie Ventura suggested everyone vote. Your vote ONLY counts if you DONT vote republican or democrat. Then your vote counts. Other than that your voting for more of the same. Obama is completely and 100 percent controlled, and we know McCain is. McCain is a puppet just like Obama for Central bank interests. Central banks have owned wall street since 1913, do you think there going to give it back now? Just because they bankrupted hundreds of thousands of citizens, and lowered that standard of living for the rest? Vote the banks out, go ahead and try that one.
    Reply
  •  
    Sep 17 12:15 PM
    So to relate this to Sirius, if the banks really want to bankrupt Sirius, NOTHING would stop them. But I dont think they want too, because Sirius makes them money, and banks like money. Media companies scare me though, because the powers that be like to be in control of them, especially when the get big. But Jessie Jackson got his clutches into Sirius for the powers that be, and Mel is one of "them", otherwise he would never have been allowed to run CBS radio and Viacom. Id think that Sirius the way it is right now, and how much control they have over it is enough to save investors. Bankrupting the company(unless you know going in what the judge will decide) in a very unlikely option.
    Reply
  •  
    Sep 17 12:17 PM
    mad dog russo really necessary for 5 million a year when investors are getting screwed? does anyone really listen to martha radio?
    As usual the company loses $, yet salaries of the top tiers dont change...
    Reply
  •  
    Sep 17 12:18 PM
    The one thing I hate most about Sirius is not the amount of stock, its the amount of stock "in float" that scares me. That needs to come down, way down. I need to see large investment interest in its common stock between now and the refinancing to feel more at ease. Does anyone have any numbers on what the banks have bought lately on Sirius? I know Lehman bought shares(oops) GS did(could have been those longs they promised to start though) and existing holders added shares. I think there was another large bank buying shares, but Im not sure. Probably wont be made public till after the fact though , im sure. Anyone know when banks have to disclose purchases? if at all?
    Reply
  •  
    Sep 17 12:22 PM
    Hes worth 5 million a year if he adds just 32000 subs. I think thats easy enough for a national radio guy to draw. Im sure they ran estimates to determine his salary. If XM existed today, they would have probably had to pay him 7-8 million a year. Thats synergies in action for you baby, ones that will never get to paper!! What im talking about when I say unmentioned synergies. You think Howard is going to get 50 million a year or whatever he gets now, no way!! Hell get around half what he makes now. They only have to outbid themselves now, he will never do normal radio again, and XM isnt in the picture anymore.

    OOOOOOOO
    OOOOOOOO
    I know, Pandora will offer him 60 million a year to go to internet radio.
    LOL LOL LOL Wheres Jwede when I need him, hes probably crunching the numbers right now on that one..
    Heslike...ooo. ya that sounds good. Pandora is the future, pandora , right Pandora is the future....Internet radio rocks!!! Wish It wouldnt keep going in and out, and I wish everytime the car moved it didnt need to reestablish a connection, lol. What did Howard say? Something about balls? LOL LOL I can see it now!!
    Reply
  •  
    Sep 17 12:26 PM
    Above poster has it right? Why no communication on a stock at this level? Why nothing to jump it? Why? Cause they wanted it right where it is. Huge negotiation tactic advantage to have a beaten down stock when talking bonds. They can say see, no value in our common, better just take the cash. We wont dilute further, and they wont want too.If they pumped the stock, then they would be using bonds again.
    Reply
  •  
    Sep 17 12:28 PM
    How does the average person make money with siri? Answer, Marry one of the ceo's. ha,ha.
    Reply
  •  
    Sep 17 12:36 PM
    help me Nascar, help me Howard, o for the love of mel, help me Opra
    Reply
  •  
    Sep 17 12:58 PM
    "The newly merged Sirius XM is expected to close out the year with 19.5 million satellite radio subscribers. Its target for next year is 21.5 million. To put that number into perspective, the company's subscriber numbers are not far behind those of cable giant Comcast (Nasdaq:CMCSA), which has 24.6 million subscribers."

    Correct me if I'm wrong, but doesn't 'radio that sucks' have 230+ million people listening to it every day? And doens't Comcast compete with many other cable companies as well as Verizon in key geographies for its subscriber base?

    For satellite radio AS A MONOPOLY within its domain - paid audio entertainment delivered primarily to cars - to project less than 1% of the 'old radio' base will add their services over the next year doesn't make me feel really happy about their growth prospects.

    On top of that, 'subscriber' doesn't mean 'paid subscriber' since that first year 'trial' you get with new vehicles is not paid in full by the auto manufacturers. Also, how many of these 'subscriptions' are currently cars sitting in the lots of auto dealerships around the nation?

    Sell Sell Sell.
    Reply
  •  
    Sep 17 01:25 PM
    DONT SELL SELL SELL
    Reply
  •  
    Sep 17 01:48 PM
    I own siri stock and I will tell you why. I got into the cable business back in '82 when people said nobody would pay for TV if they could get it free. I got on the bandwagon with John Malone (TCI) and never looked back. I have seen all this negative press and doubts before. If you can hang on, I am betting (with real money) that you will make money. The real trick is not to get greedy. I bought Force Protection at about this price and sold way before it peaked. No regrets because I made over 700% on my investment. I will be a buyer of this soon.
    Reply
  •  
    Sep 17 02:10 PM
    Relmor, a couple a questions. what "long shares" did GS promise to purchase? and what do you thing will happen with the SEC short regulation implemented today, effective at Midnight?
    Reply
  •  
    Sep 17 02:11 PM
    HA! Goldman Sachs is Sucking a big fat lolipop [you know what i mean ; )] right now... Take that weinke or whatever the hell your name is for giving SIRI a sell rating.
    Reply
  •  
    Sep 17 02:29 PM
    Relmor, as you know but many other don't, ALL major stocks are now traded through electronic trading programs, as well as individually. What you are saying is absolutely true, because that is what the program is designed to do. That's why on a really bad day, the market puts the curbs in to suspend these trading programs, because they will relentlessly beat a stock, any stock. to death as the programmed conditions are met.
    Reply
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