The satellite radio business could be in such sad shape that a merger between Sirius (NASDAQ: SIRI) and XM Satellite (NASDAQ: XMSR) may not do either much good. Neither has ever made a net profit. Their subscription growth rates are slowing. And, each has well over $1 billion in long-term debt.
Goldman Sachs recently said the combined company might need to raise $500 million to $1 billion to fund operations.
The editors at The Wall Street Journal figured this all out, perhaps a bit later than most. According to the paper, "The nation's only two satellite services are growing slower than previously while the broader economy is in a slowdown. Fewer people have been buying new cars, which is where the companies derive the bulk of new subscribers."
While the data may be obvious, the conclusions may not be. Companies with over $1 billion in debt and huge operating losses often do not make it, at least not in their current form. If the FCC does not approve the deal or puts a number of restrictions on it, one or both of the companies may have to seek the protection of Chapter 11. Huge debt service against no profits can do that.
Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 letter.
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Reader Comments (Page 1 of 1)
6-03-2008 @ 11:25AM
Zipper said...
I never was one to sign up for pay radio, because I am cheap and used to the free airwaves. Now perhaps, if the satellite radios go public maybe I can listen to my ol bud, Howard Stern.
6-05-2008 @ 11:21AM
Dave said...
Your blog is as meaningless and trivial as you are. Seriously, you are relying on Goldman Sachs? And failing to miss the projections of other financial houses? Yes, fundamentals with one of the satellite radio companies is failing, however they are improving with the other one. Your blog is even further uncreative when you have to defer to the authors of other news articles instead of using your own intuition. For example; did it ever occur to you that potential consumers are waiting on the sidelines until this is straightened out? Get a clue, puu...llleeeaassee. And if not a MBA, than how about a BSA in English with an emphasis on creative writing.
6-05-2008 @ 4:31PM
geoff groedner said...
This merger is longer than two Liz Taylor marriages, but a lot uglier. At the end of the first week, when the deal is finally approved, there will be a lottery to see who can guess how many dents there will be in the petty cash box. All submissions must be over 1,000.
6-10-2008 @ 3:35AM
Nick said...
You and TR are on the ropes, Mac, among
others. But not SR, not by a long shot...
Satellite Radio will be standard in ALL autos.
Whom do you think you're fooling. Hmm?
Stay tuned...(pun).