Sirius Satellite Radio (NASDAQ: SIRI) and XM Satellite Radio Holdings (NASDAQ: XMSR) are on the move today after help from Cramer and David Faber. Sirius is up 0.8% and XM has also risen 0.8% so far today.
Investors will get a "$5 stock almost immediately" when Sirius and XM merge, in Cramer's view -- but the deal has been held up in regulatory hearings since it was announced in February. Meanwhile, Mel Karmazin -- Sirius' CEO -- told Faber that the deal has a 100% chance of going through by the end of the year because in his view it is not anti-competitive.
I think Karmazin is wise to discuss a backup plan in case his estimates prove overly optimistic. He said that Sirius generated $30 million in positive free cash flow in the last quarter of 2006 and that business as usual is his backup plan. For some reason, Karmazin equates last year's fourth quarter with ongoing positive free cash flow -- this despite losing $176 million in this year's second quarter and $122 million in the first.
I don't know if business as usual is realistic if the merger does not go through. What do you think?
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.
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Reader Comments (Page 1 of 1)
10-16-2007 @ 1:43PM
Harold said...
All I know is that 2 people I know got XM radio with new cars...and they LOVE it.
10-16-2007 @ 3:53PM
Ernie Silkey said...
This is taking to long to decide and is hurting both companies. Business as usual should not be what Karmazin is saying if the merger goes through, but cutting the expenses as he is proposing and improving product/content/variety. These companies have spent way to much on celebrities and it has hurt them. Yes they help attract customers, but as it is with all entertainers and sports, they are over paid. All CEO's are over paid as well so lets see the merger, rein in the expenses and Sat Radio will see some profit.
10-16-2007 @ 4:55PM
JDay said...
This deal is taking forever, but in the end it will get finalized. Too much time, money, effort, and negotiation http://www.newsvisual.com/newsvisual/2007/07/connections-mak.html has been spent on this deal for it to fall apart now. By this time next year shares of these companies will probably be through the roof.
12-10-2007 @ 3:41PM
Joe Liston said...
I only listen to four channels on my Sirius radio, why pay for 130??? Just charge me for the four i prefere! Also dump Stern.