Thursday, April 12, 2007

Dodging Bullets: thestreet.com Negative On Sirius

Bad Reception for Sirius
By Frank CurzioRealMoney.com Contributor 4/12/2007 1:25 PM

Editor's Note: This Stocks Under $10 alert was originally sent to subscribers April 12 at 12:14 p.m. EDT. It's being republished as a bonus for TheStreet.com and RealMoney.com readers.

Sirius Satellite Radio (SIRI) is arguably one of the most popular companies in the Stocks Under $10 universe. We last wrote about the company in December and have been negative on the stock for sometime. With shares now trading down at our $3 target price, it's time to revisit Sirius -- to see if the stock offers any long-term potential for investors.
When we first wrote about Sirius, our thesis was that its subscriber estimates were too aggressive and that satellite radio was no longer the "must have" product for consumers. We still believe the future is cloudy in this regard; however, the playing field has changed.
On Feb. 19, Sirius and XM Satellite Radio (XMSR) agreed to merge in a deal that would create one giant satellite radio company with roughly 14 million subscribers. If the deal is approved, the merged entity would create cost synergies and reach profitability much more quickly than XM or Sirius would independently.
However, there is some concern that the Federal Communications Commission could rule against the merger -- given that Sirius and XM are the only two companies that have been granted satellite-radio licenses. The Justice Department also would have to sign off on the deal. These hurdles have caused Sirius' share price to fall to a 52-week low of $3.07, with shares recently trading at $3.10...read more: here

4/12/2007 10:53:00 PM

SSG Has Merged. You Can Read All Of The Latest SSG Content By Clicking Here


  • I always have to laugh when these guys mention "cost synergies", and for sure, in the context this guy used it ("reaching profitability sooner"). It is LOL funny.

    There has yet to be a credible analysis showing that there will actually be cost savings from this merger. The last I heard, Mel told us there would savings in catering fees. Of course, he conveniently put us on notice that there would be no "cash flow guidance" going forward (ah-hem, yeah, right) -- big surprise.

    The cost savings aren't there. This is just the next misdirection attempt in a series by Sirius to take the markets' eyes off the ball. NFL didn't save them, Stern couldn't save them, and the merger won't, either.

    With any luck, the FCC will stop this nonsense before it destroys the satellite industry as we have known it since November '01.

    By Anonymous Anonymous, at April 12, 2007 11:22 PM  

  • I find your comment interesting. There have been many analyst reports that have outlined synergies. Common sense tells the most uninformed that there are synergies that will happen.

    1. One management team vs. 2

    2. Programming efficiencies.

    3. infrastructure synergies in space and with terrestrial repeaters.

    4. Marketing expense synergies.

    5. OEM platform synergies.

    6. Retail shelf space synergies.

    7. Cosumer handling synergies

    and there are many more.

    Regarding cash flow guidance, the stance is reasonable considering the merger request. These companies will have a shift of focus, and thaqt is known. Investors will have ample opinion from the 32 or so analysts that follow the sector, and very reasonable assumpions can be made by investors based on historical data.

    Clearly you have an opinion that this is all a case of smoke and mirrors to make everyone look the other way. Is that a reasonable opinion? Do you think that attempting a merger with the government pouring through your books is a course of action a company would take if they wanted to "mis-direct"? Surly you do not really believe this to be the case.

    These companies have passionate fans and passionate investors. Some do not want to see change, and some refuse to see that satellite radiuo can take some dynamic steps with a merger.

    There were such people when FM radio came to be....the 8 track tape, the cassette tape, the CD, and the MP3 player.

    Some are better adapted to change than others, and this will always be the case.

    Rather than carry angst and frustration, wouldn't it be better to express your views to sirius and XM of what you would see as improvement that can potentially happen with a merger?

    These companies are in the midst of trying to merge, and they are not going to give that up. Now is the time to point out what you would like to see.

    You see, if you call them and say, "I don't want a merger" they will thank you in a polite manner, hang up the phone, and continue down the merger path. Would it not be better to call and say, "If this merger goes through I want to see a "classic rock hits" channel and a "classic rock deep" channel."

    In many cases it is better to know which track the train is on, and to try to influence the speed of the train than to get angry with the train and jump in front of it. With one you may make a difference....with the other you wont

    By Blogger SSG, at April 12, 2007 11:50 PM  

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