Sirius Satellite Radio, Inc. (NASDAQ: SIRI) laid out what it thought its financials would look like next year after a merger with XM Satellite Radio Holdings (NASDAQ: XMSR). The market wasn't impressed.
Sirius had an odd way of expressing how it would save money next year. According to the company, "Total synergies, net of the costs to achieve such synergies, for the combined company are expected to be approximately $400 million in 2009." The firm also said it expected positive free cash flow.
All of that good news sent Sirius down almost 9% to $1.91. Volume was heavy at over 35 million shares, so the selling turned into a stampede.
Sirius forgot to mention the one number that Wall St. really wants to see which is what it thinks the revenue for the merger company will hit for 2009. Without that, it is impossible to determine whether any of the cash flow numbers are believable.
Investor concerns about Sirius are now more on the sales side. The idea that the marriage will allow for expense cuts is already assumed because both companies are in the same business.
The top line is critical. Observers fear that subscription growth is dropping quickly and that potential customers are turned to other devices including multi-media handsets and Apple Inc. (NASDAQ:AAPL) iPods. The single largest source of business for the company is new car buyers. For now, they are in short supply.
Sirius can't make its case if it can't say what its revenue prediction is, and defend it with assumptions. It look like the company is afraid to do that.
Douglas A. McIntyre is an editor at 247wallst.com.











Reader Comments (Page 1 of 1)
6-30-2008 @ 8:08PM
dsanterelli said...
If it wasnt for the FCC and the JUSTICE DEPT. the interest in the stock would be there.They have deliberately tried to ruin this merger because they do not like Howard Stern.
7-01-2008 @ 2:37AM
Beltway Greg said...
Cramer said that if they merge SIRI would be a $5.00 stock. Yeah, in 2020.
Beltway Greg
7-02-2008 @ 7:49AM
EMIL J KOVACH JR said...
"Soon, with free Internet access, people in cars will be able to access every radio station in the world that streams audio, plus Internet audio and music services such as Pandora.com and Last.fm. Baseball will be available via MLB.com for $10 a year or free from radio stations that have an audio stream of the games, and the same with NFL games.
All of this means that content providers (music, sports, talk, comedy, and news) will be able to go directly to their consumers and bypass (disintermediate) traditional distribution channels such as radio stations, satellite radio, television stations, and cable systems sooner rather than later. The disintermediation of the main-stream, traditional media has begun.
There are several implications: One is that content will be more important than ever. Another is that creators of content (artists, writers, musicians, performers, etc.) can now sell their creations directly to their audience without having to pay rent and fees to middlemen such as wholesalers, agents, and distributors. Another is that marketing in the disintermediated world will be more important than ever – getting the message out about creative content to widely dispersed and niche (long-tail) audiences will be more difficult and require innovative solutions. Audience choice will be much greater as people learn that they can pull exactly the content they want from the Web and individualize it rather than having it pushed at them in homogenized, distributor controlled bundles. And, trillions of dollars of investment in buggy-whip distribution assets will be lost as radio towers are turned into cell phone towers and transmitting equipment is scrapped.
Terrestrial radio stations owners seem to be doing a good job of repurposing their content and streaming it on the Web in creative, user-controlled ways. Television networks are learning to stream their content on the Web and to create new, Web-friendly content. But what is satellite radio doing besides seeing the future through merger-tinted rose colored glasses? If Sirius and XM are to survive, they must begin streaming their content on the Internet. They can make their content password protected for subscribers for the time being, but be ready to make it free if the merger is not approved.
Sirius and XM will have to do what AOL did when it began losing dial-up subscribers by the hundreds of thousands each quarter, switch to a free, ad-supported model. Time Warner cannot sell AOL at anywhere near its $20 billion valuation because that valuation was based on a revenue model that produced over $1 billion in subscriber revenue, which is now sinking faster than real estate prices. The same will happen to Sirius and XM if they don't act"
Quoted From Web Article--Today
EMIL J KOVACH JR
7-02-2008 @ 11:21AM
Sheldon L said...
SIRI going to the same graveyard as MOT satellite phones.