Friday, January 12, 2007

Businessweek On The Satellite Sector

Satellite Static
Businessweek, Jan 12, Steve Rosenbush

XM and Sirius are being pressured to merge because of financial troubles and are discovering what others in the sector already know: It's a tough business

Investors are agitating for a merger of XM Satellite Radio (XMSR) and Sirius Satellite (SIRI), the two providers of radio via satellites that orbit the earth. Speculation about a deal began last summer and gained momentum in early December, when Sirius cut its subscriber forecast for 2006 from 6.3 million to between 5.9 million and 6.1 million (see BusinessWeek.com, 12/5/06, "Sirius Sings the Holiday Blues"). Over the course of 2006, shares of XM and Sirius plunged 62% and 54% respectively, as investors fretted that the potential market wasn't big enough for two players.
Later in December, stock market pundit Jim Cramer proclaimed, in an interview with BusinessWeek Editor-in-Chief Stephen Adler, that Sirius Chief Executive Mel Karmazin needed to do a deal with his rival. "If Mel Karmazin does not merge with XM, he will not make it. That company cannot stand alone," Cramer said (see BusinessWeek.com, 12/25/06, "But Jim, What Do You Really Think?"). And on Jan. 10, analyst Eileen Furukawa of Citigroup (C) issued a research report saying that top executives at XM seemed more open to a merger, sending shares in both XM and Sirius higher (see BusinessWeek.com, 1/10/07, "Wedding Bells for XM and Sirius?"). ..read more: here

Labels: merger, sirius, xm