Five Positive Points on Sirius: Is the Street Listening?
With the economy being what it is, a feel-good economic story is hard to digest. It is a challenge faced by many companies, as they try to hold the line, maintain a positive outlook, and guide the street to be understanding of numbers that are better than should be expected, but not as good as years past.
Sirius XM (SIRI) CEO Mel Karmazin spoke with Reuters Wednesday, and much of what he outlined should be seen as a positive for the company. However, the street needs more than good intentions and words, and even when a company delivers on their guidance, as Sirius XM did in Q3, people still look at anything with a jaded eye.
Karmazin made several statements, which in normal economic conditions would be enough to get some traction in the equity. Wednesday, this news was simply absorbed with a shrug of the shoulders, and a show-me mentality.
POSITIVE POINT #1
Karmazin sees double digit revenue growth on a percentage basis in Q4. Wonderful news that seems to have fallen on deaf ears. In a time when other media companies are seeing double digit declines, Sirius XM Radio is still growing, yet no one seems to care that Sirius XM’s revenue is a polar opposite to all of the bad news out there. Perhaps it is too difficult to grasp that there are still companies that are in a growth trend at this point in time.
POSITIVE POINT #2
Karmazin is confident the company can refinance debt due in 2009. Perhaps this issue is the overshadow that simply refuses to go away. Karmazin has been expressing confidence with this subject for a while, and this issue is where a “show-me” attitude is likely warranted. That being said, I have always felt that the company will indeed be able to get the debt issue resolved. I would have hoped that it would have been done by now, but still, it should get done. For the equity to see improvement, an answer on the debt needs resolution.
POSITIVE POINT #3
Karmazin has no immediate plans to cut its subscription prices, even in the midst of the economic recession. At a time when prices are being slashed left and right, you would think news that they will be able to hold the line would be news that is well received. Instead, the street barely reacts. This is substantial news. This means that churn is stable. It means that new subscriber numbers are satisfying the business model. It means that revenue can continue to grow. Perhaps the lack of a profit from Sirius XM tempers this news a bit, but with the continued positive trend, shouldn’t the street give this a bit more weight?
POSITIVE POINT #4
“We did exactly what we wanted to do for Black Friday, which is not great news because we didn’t have high expectations,” Karmazin said, referring to the Friday after Thanksgiving, which kicks off the holiday shopping season.
While humble sales are not a positive point, the fact that the company was able to meet their expectations is stable. Had sales been shy of low expectations, the worry lines would rightfully appear. With the news being that holiday shoppers are being cautious, meeting your expectations is a small victory unto itself. On a side note, meeting those expectations did not come without an expense. Many retail radios came with free service for three months. Thus, you have a new subscriber, but no revenue just yet.
POSITIVE POINT #5
Perhaps the biggest bit of news from the Reuters Media Summit was Karmazin’s statement that Sirius XM Radio is not for sale. “We don’t feel that we need to be acquired,” he said. “You should assume the company is not for sale.”
With stock prices at low levels, one distinct worry many may have is that the company sells itself. Investors who believe in the long term outlook of the concept of satellite radio would potentially be looking at a situation where they would not participate in the success of the company in the years ahead. Of course, there is no guarantee that the company will be an overwhelming printing press of cash, given that it has at times been a printing press of shares. However, those that have maintained faith in the concept should be able to reap the reward should it come.
In the end, it boils down to what transpires over the next few months. Will Karmazin’s outlook be realized? Will the street finally be able to digest good news? Will satellite radio be successful in refinancing their debt? There are a few questions that seem to be keeping many hesitant.
[Reuters]
Position: Long Sirius XM
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This article has 116 comments:
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b3rkut
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37 Comments
Dec 04 06:58 AM-
ralpht
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7 Comments
Dec 04 08:20 AM-
Newgate
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3 Comments
Dec 04 08:43 AM-
cos1000
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1219 Comments
Dec 04 09:05 AM---Karmazin says he is well aware of how the stock has performed, since he has put every dollar he has earned in salary back into Sirius shares.
and this---
"A lot of people own shares, and some people think that I've done the worst job since I've been at the company," he said. "It's not a good time to be a publicly traded company that's not making money, that doesn't have earnings, that has to get its debt refinanced."
He added: "There is nothing, nothing, zero, more important than us making money and getting through this 2009 hurdle."
www.reuters.com/articl...
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doctorex
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11 Comments
Dec 04 09:43 AMthanks to the merger, sirius-xm is a monopoly with high barriers to entry (literally, these barriers being the satellites). siri sells a product which a large number of prosperous people now believe to be essential. with a little luck, siri will join the monopoly hall of fame: microsoft, ebay, google. doctorex says buy, buy, buy, and hold for $100 per siri share, maybe higher.
doctorex has spoken.
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Bababooie
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161 Comments
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Dec 04 09:57 AM-
User 271917
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45 Comments
Dec 04 09:58 AM-
Scot's Slant
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43 Comments
Dec 04 09:58 AMAnd by the way, there is one more thing: When the restructuring of debt comes due in February 09 -- all 300 million of it -- do the third grade math; 20 million subscribers at $10 a month equals a shitload of cash in SiriusXM's hands. Analysts can use charts and crunch all the algebric numbers they want to create bleak future outlooks but the basic facts remain what they are; with a healthy revenue stream of dollars pouring into Sirius XM's coffers each month, a billion dollars of debt is nothing more than a mere nuisance....
Scot's Slant
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sl62
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820 Comments
Dec 04 10:18 AMThanks for taking the time to retrieve the full article...and point out these additional quotes--they have the most tell of all. I think they all add up to our current thinking about dilution for debt and reverse. Here's why...
>>---Karmazin says he is well aware of how the stock has performed, since he has put every dollar he has earned in salary back into Sirius shares.<<
This could be a little misleading (per Mel usual). His buy of 2M @ 1.37 = $2,740,000. So while that might be his salary, it's not all his bonus money--although maybe he includes all shares he's purchased at higher prices. I think he can accurately say bonus money is not money earned (if that's the word he used--I don't see this as a quote)...but the other thing that strikes me about this comment, is what we have said a few times at various phases of the decline. I still feel this buy, when he did it, was strategic for "down the line" or now, as they prepare for the 2nd leg of dilution to pay down debt (as I believe was always the plan). And I believe this because it makes sense that he did the ugly financing because he was unable even in July to get regular financing. Any banker would have been nuts to give him money given all the incoming XM debt and while the company was cash flow negative. To drill down even a little deeper on that, one would assume he could have even done a partial bank and partial bond, had he could--to be at least somewhat shareholder friendly. So I still believe this purchase in particular was part of the stage show, culminating on 12/18. I can nealry guarantee, his "in sympathy" buy will be mentioned at the meeting. Think about this...how would this all look if he HADN'T bought those shares? But also, bottom line, he made so much money in previous ventures, him sinking his salary into SIRI is nothing more than investment money (my guess of which either amounts to extra gains or valuable write-offs for him). He's most likely not living on his SIRI salary or bonuses.
>>"A lot of people own shares, and some people think that I've done the worst job since I've been at the company," he said. "It's not a good time to be a publicly traded company that's not making money, that doesn't have earnings, that has to get its debt refinanced."<&...
This statement has little tell but is all true--on all counts. He has done a horrible job since he's been at the company FOR SHAREHOLDERS...for THE COMPANY, he's done just fine--and is about to do even finer in that regard as of 12/18 (IMHO).
>>He added: "There is nothing, nothing, zero, more important than us making money and getting through this 2009 hurdle."<<
This reconfirms something I wrote a few articles ago about his insatiable desire for FCF--at all costs (meaning regardless if it is at our expense). He has said once before in an interview that the Street will not let up on this company until it has positive cash. He's locked on it, and he knows there is only one way to get it (to eliminate most of the debt..and the only way to do that is to start the printing press). Again, I offer this was the plan all along. We as shareholders just were never told. We were sacrificed. And to be fair to the company, when a public company, any public company, is in heavy growth mode, lambs will be sacrificed for the better of the entire company and to ensure it's survival. And those lambs are us.
My last comment is tying back in Mels investment in SIRI. The differential between hs investment and most of ours is his is TOTAL play money with an indefinite time horizon. He can absorb what has happened to the SP and then after the reverse, with debt gone and the SP back up to 3.50, he truely believes through the growth of that new company, he will at very least get back to even within a few years. Shure46 mentioned this yesterday. Based on math of the current iteration of the SP, it will be well within this company's potential to get back to say 2.00 within 2 years (but of course, the SP will have reversed and will be * whatever the decided upon multiple will be). But I see that as very reasonable. And so, Mel will be at least back to his 1.37 and then some, toward his other buys. He will be fine in the long run. Esp. then if he does eventually take this thing private, he wil make out like a bandit there. He wil be fine. Shareholders are a much different story.
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sl62
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820 Comments
Dec 04 11:02 AMI think it is healthy at this point to assess the current situation on its own merit rather than with noise of the recent past. Meaning, we've all been through a very contentious and precipitous decline in this SP...which has been accompanied by a whole lot of animosity, consternation, and conjecture toward management, the situation, and the company in general.
The situation we face right now is one of being at the bottom. .14 - .17 is exactly one half step away from true beginning bankruptcy levels. We know this from past companies and if a current model is needed to verify, as I 've alluded to recently, you just need to look to Circuit City (now CCTYQ). On their BK announcement, their SP fell instantly to .06 that morning. They are curently back up to .20 as shorts have covered and bottom feeders are trying to make a buck or two. If and when this new dilution takes place for SIRI (which is essentially a bankruptcy without actually having to file, be instantly delisted, etc...), the current SP nearly has this event baked in. I believe shorts are waiting for this event, at which time the SP will drop to approximately .06 - .08 briefly, then it will explode to the upside as shorts cover up and make their final exit (and daytraders looking for quick easy money will pile in accentuating the move). Of course this will be an artificial boost, and how high to the upside we will go, no one really knows. It just depends on the action. But with EOY accounting, it is likely to be signficant--for a however brief period of time. I believe this to be the most likely scenario in the short term. I think positive Autos money decision causes a short move higher, maybe to .30..which is roughly where the SP should be at meeting time...which is much more respectable than today's paltry .17. But then that's a perfect set up for the stock to crash to the BK levels I speak of after dilution is announced as ratified, and that it wil be the way out of the debt problem. That's the short-term IMHO...
But then there's the long term. Personally, I'm getting a much better feeling about this plan than before. As said, before, I as many, were losing their shirts watching the stock methodically cascade downward. Tough to watch and especially at night on the brokerage page as wealth kept slipping away. But that's the past. That part's now done...as painful as it may have been to all. I guess my perspective is this. As said, we are nearly at BK levels (or similar dilution levels). It's clear to me at least what the company's plan is--to dilute one last time (now next to priced in), get rid of the debt overhang, hang on to and build on 4th Q COH, reverse this sucker and move on. With this kind of company, with this size of sub-base and revenue stream..it just might actually work on the other side...and work not only for new shareholders but help existing holders recoup some of this side's losses. I'm beginning to believe that since we've already made it to the bottom, there is nothing but upside remaining. The hard part was getting here. Now that we're here, it seems to me, you'd be crazy not to do this new share deal. Given the options, it's the best one on the table IMO. And I think the key to my thinking is that we are already esentially "in BK." So why not just do the damn shares, pay off the frrickin' debt and move on. Then, on the otherside, with no debt, I believe the new stock will be invigorated and received by the Street. The main reason is this. Other than the debt, this company is not sick. It takes a while to be able separate the wheat from the chaffe, when there is so much negativity going on and with so much distracting noise. But the reality is, this company is not sick. It's healthy in fact. EXCEPT for the debt. And where reverses (and dilutions) are concerned, it is important what exactly gets accomplished
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sl62
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820 Comments
Dec 04 11:07 AM...gets accomplished, just as in a BK it is equally important. So if this is all about taking out debt, and freeing the company from those shackles, this should be a positive in the end. I now believe, given the circumstances, ipsofacto, as we face them now, this dilution and reverse is the right way to do and will turn out to be positive for all long-term shareholders on the other side. Now will those who bought in @ $6 - $7 get back to basis...not for a long time if ever. But even those folks, if you can remain in this timeline for anther year or two, you should do alright in recouping a large part of your intial investment. That's what I think anyway.
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sl62
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820 Comments
Dec 04 11:23 AMIn reality, NORMALLY, only sick companies (short of meltdowns like we've just had or hedge targets), who try to reverse out of their sickness get hurt on the other side. I have to say again, other than the debt overhang, I don't view SIRI as being sick at all.
Most likely, SIRI turns out to be nothing more than an extremly long-term play. Many of us mis-judged their timeline and have paid for it (for now). But it doesn't mean through time and patience with regard to the REAL TIMELINE, those losses through mis-judgement won't be avenged at least to a large degree...and I would offer in the not to distant future relatively so. I the Street accepts this restructure, as I belive they will once the debt is gone, you could actually see a substantial increase in SP in '09--provided the company sticks by and to their performance metrics...
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connorport
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59 Comments
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Dec 04 11:33 AM-
connorport
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59 Comments
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Dec 04 11:33 AM-
163888
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994 Comments
Dec 04 11:45 AM-
163888
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994 Comments
Dec 04 11:47 AM-
cos1000
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1219 Comments
Dec 04 11:52 AMThanks for the well considered thoughts and you may be right about his plan to dilute to pay down debt. I do not think he planned on the financial crisis interupting the worlds financial markets the way it did. No One did. The two Fed lackeys, Paulson and Bernanke didn't see it until it was two late and there fell B.Sterns and Lehman, not to mention all of the other consolidation that is going on. Look around and tell me how many IB's there will be in the future that are not also Bank Holding companies. This was not part of anyone's plan IMHO.
I also am not as dire about the shares for debt and then possibly a reverse of 1 for 20 or 30 split. I said back in June and July, before all of this debacle, that for Sirius Xm, 2009 would be the Year of Debt Refinancing. I called Brandon M. out on his article the stating that Debt Was Not An Issue for Investors. Still, no way did I think we would be here in Dec 2008, but 2009 Debt issues, realizing all merger synergies, and maintaining growth in revenues were then and still are the key to unlocking SP appreciation. Mel at least confirms this. I still feel that he will not announce any debt restructuring until after the annual meeting as we have already discussed.
I feel that when he does announce the company's plans, even if the SP takes a hit, it will be short lived. Also the more debt that can be taken out the better. Feb and May 2009 debt is a total of $560 M, with $210 M left in Bonds and the $350 M in Bank Facilities. Taking this debt out all at once, while maintaining a healthy cash position, coming off of a solid cash building 4Q, would go a long way to building confidence in the company, benefiting the SP even without the RS. (the video attached to the article has him talking about maintaining a healthy cash position so paying debt off is probably not going to happen) In order to fairly price the value of the company's stock, we have to start to look beyond the 1st half, 2009 debt issues. We can safely assume that the debt will be taken care of and it probably won't be pretty.
I do feel that the anemic marketing performance to date, combined with the programming and content consolidation efforts, is a prelude to their launching the full product line of interoperable radios and option filled subscriptions Q1, 2009. This after all is part of the merger process to execute on their business plan. They have, along with other companies, given up on this holiday season. The FCC delays pretty much squashed their ability to role out an interoperable radio for this season. Consolidation of operations, programming, and advertising / marketing costs became their goal. Best of Both to existing subscribers is their Revenue Generator for the quarter, and cost containment the way to FCF in the Q4, 2008.
The folks here posting to date, including me, are focused on debt, share dilution and reverse split. Some go even further in wanting the B of D and Mel and company ousted (not my POV). To me, in the short term, the best news that can happen is that the Sun Rose on 12/19/08 at its predicted time, and that Sirius Xm is still in business without a BK filing. From there my expectation will be a lot more transparency on the company's operations and the announcement of debt resolution as quickly as is possible.
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163888
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994 Comments
Dec 04 12:03 PM-
163888
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Dec 04 12:15 PM-
163888
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Dec 04 12:22 PM-
killerkaul
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667 Comments
Dec 04 12:25 PM-
cos1000
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1219 Comments
Dec 04 12:29 PMI think that you are right on target in identifying the internet as the next real battleground fore media companies. Companies like Slacker for wifi portable devices and Hulu, NBC owned, for internet TV content are showing a glimpse of what is coming down the road. It is absolutely vital that Sirius develop the very best in internet, wifi capable, content software, for a variety of innovative devices. My opinion is that they should be a content provider to many manufactured devices, and utilize their internet product to access world markets. Music library services and advertising on the internet will be huge for the very best content providers IMHO. The open access requirement by the FCC has already cleared the way for them to focus on Content and Software to Deliver that content. The roadblock that will be there for all competitors is Royalty costs, which might be mitigated by finding ways to partner directly with Artists like the record companies use to. Even telephone services are now on the web. As others have said Satellite Rad will give replace by WiFi, I feel the markets will determine the best hardware to provide premium content to a variety of platforms of technology.
Satellite offers National Coverage where WiFi still falls short. Having devices in the future that can do both is not out of the question. Early Cell Phones were analogue and digital network compatible as bridge devices between the two transmission types. Innovative developers of hardware / software can do the same with WiFi or Digital Sat. devices. In the end the market will determine what hardware will look and feel like, but Great Premium Content will be around forever. That Content is what Sirius Xm needs to concentrate on for the future.
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cos1000
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1219 Comments
Dec 04 12:41 PMYour right that the debt has always been there. This 2009 debt was the result of the last bottom in SP in 2003. My feeling right now is that the debt is so close that investors can't see anything else around it. Once removed or restructured, even with some dilution (not 1 for 50), those that are in on the other side will have a brighter future. By the way with the Autos on the Hill today seemingly receiving a warmer welcome, I bought back in with very little reserve at .1632 this morning. Over the last two months, my Playing With Fire, has me with an increased position of over 25K shares with the same dollar value. I had to rotate in and out completely twice to get their and for now I am done playing.
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cos1000
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1219 Comments
Dec 04 12:44 PM-
Bababooie
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161 Comments
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Dec 04 12:44 PMTHE BAD
The all exhalted "Mr. W" of Goldman Sachs led the Parade to current cesspool price, with a constant downgrading.
The Crazy Uncle (hartlieb) delayed the merger six months due to discovery on interoperability.
The Domestic Auto Companies have lost sales year over year by more than 30% (being conservative).
The Credit Market is still not giving out loans (unless you already have the money).
THE GOOD
"Mr. W" has found other avenues of focus to tout pessimism.
The merger is completed, and "Best of" provides service to the Merged consumer base.
Sirius is on target to increase their sales numbers despite Auto numbers
LOL. . . . .I bet you thought I was going to say something good about the credit market.
My father lived through the depression and related that the best way to survive was to "ESCAPE". The "ESCAPE" was in the form of entertainment. That entertainment via movies & radio was the topic of discussion at work, and brought smiles on his co-workers. I believe that there is no better time for an entertainment provider to grow and prosper.
Smiles to all. . .
.and Killer. . .
give the dog a pat on the head, it lowers blood pressure!
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cos1000
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1219 Comments
Dec 04 01:00 PMJust one question........ The pat on the dog's head lowers killer's blood pressure of the dog's.......
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cos1000
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1219 Comments
Dec 04 01:01 PM-
163888
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994 Comments
Dec 04 01:02 PM