Sirius XM Just Days From Shutting Doors

[flowerfeeder]

Sirius (SIRI) faces bankruptcy and an investor wipe out

Posted Nov 19th 2008 4:14AM by Douglas McIntyre
Filed under: Bad news, General Motors (GM), Sirius Satellite Radio (SIRI)

Sirius XM (NSADAQ: SIRI) faces a number of problems. Those caused the stock to drop to 20 cents yesterday, down from a 52-week high of $3.94.

Sirius is not only sitting on between $3 billion and $4 billion in debt. It has also never posted a net profit. There are still questions about whether its merger with XM Satellite will yield enough cost cuts to make the operation profitable.

But, none of those things are the final nail in the coffin. If one of The Big Three goes under, especially if it is GM (NYSE: GM), Sirius will lose one of its largest sources of new subscribers. Since some people who take the service drop it every month, which is normal attrition, those customers have to be replaced. For the company to grow, each month has to show net new additions which greatly outweigh cancellations.

Sirius cannot afford to lose its flow of customers from a major car maker. If it does, it debt service will overwhelm it, and finding new capital will be impossible. Who wants to lend money to a company which is losing its most important sales pipeline?

If GM drops, Sirius will fall within a month.

 

[jwt873]

SIRI dipped down to 16 cents a share today... It's back up to 18 cents as I write this... It's not looking good at all.

 

[limegrass69]

That's a little bit much of a Doomsday scenario. Sirius/XM has deals with just about every car manufacturer out there. If GM fails, people are still going to buy cars...just some other brand. That brand, in most cases, will have a satellite radio standard or available as an option.

You could make the argument that there will be some subscriber losses due to the tightening economy (satellite radio is a luxury). Or, automaker subsidies by Sirius/XM may increase to encourage broader adoption of the radios. Or Sirius/XM will give away more "free" months to discourage subscribers from defecting. You could even make the argument that GM may try to dump its XM investment to raise money. Those are all more compelling and realistic arguments than what this article and the original poster are saying.

It's bad...no question. I think the reasoning is flawed.

 

[Supafly]

Hope they don't print too many articles like this one.

Won't be helpful this holiday season trying to sell equipment/subscriptions to new and exisitng customers already confused about what the heck's going on.

If you want to keep Sirius going buy as many Chevy Surburbans as you can. Gas is cheap.

If Sirius goes down it will be the biggest blunder in broadcasting history. What a great idea and what crappy execution.

 

[kc1ih]

I’m not clear on the source of the original article. When posting stuff like this, it would be good to make it clear what is the original source, otherwise it is just hearsay, which is how I am taking this.

 

[flowerfeeder]

My two yearly subs renew automatically in a couple days. If they close up shop in a month or two, I wonder if I'm gonna get my money back.

 

[Supafly]

My two yearly subs renew automatically in a couple days. If they close up shop in a month or two, I wonder if I'm gonna get my money back.

I they go bankrupt you'll have to stand in line behind the prefered shareholders and largest creditors.

 

[flowerfeeder]

The article came from google news, by the way.

 

[Schlep]

I'm looking for them to go into chapter 11 in February. $210 million is a lot to refinance in this economy, especially for a company that shows no reason to believe they'll ever repay it.

 

[jwt873]

Not only do they have 210 Million to pay by February, they have to raise 600 Million more by the end of 2009...

If they can't come up with the cash, then we really have to worry.

 

[JoeTan]

Every business you deal with is in reality "a couple days from closing their doors". Only business that are 100% cash (nothing over a hotdog stand) they are in trouble as the revolving capital they rely on is GONE.

GM isn't the only one who's running out of money. EVERYONE is.

Bottom line, SUPPORT LOCAL BUSINESSES or you'll REALLY see your taxes go up and it's already started. Empty buildings = no commercial taxes = you pick up the slack.

 

[Santinelli]

I think what will REALLY help them is if they advertised there new packages more... $9.99 for music? That's cool! AND a good price point, for someone wanting to purchase satellite for say a FRIEND for christmas...

But of course you need to advertise, and after you've pissed away a TON of money to merge with your competitor, spent a TON more for severance packages to get rid of a ton of people... You need Money...

Its going to be a tough road ahead....

 

[limegrass69]

Something tells me that the bankruptcy courts will be quite busy in the next couple of years.

 

[limegrass69]

Here's another negative perspective on the prospects of Sirius/XM. It addresses the points of the OP and goes into some more details...it's rather depressing...

Sirius XM at 17 cents - look out below - Nov. 19, 2008

 

[Jleimer]

My question is if they were to go into bankruptcy would they go Chapter 11 or 7 because if they were 11 , I would bet Clear Channel would buy it and commericialize the hell out of Satellite Radio. Anyhow in a interview that Sirius Starts host Dee Snider did in October with Steppin Out Magazine he said this about Satellite Radio which is playing true today. I have a friend named Don Specter. He's the third largest patent holder in the world. When he talks I listen. He invented the hyperbaric chamber. The guy is a genius. He was a brain surgeon at 14 and they based the IQ system on his IQ. He got a 200 and everybody else was rated from there. Anyway, he said to me two years ago, "Satellite was doomed before it started." I said, "What do you mean?" He said, "Dee, nobody wants multi-pieces of hardware. They want everything all together. When you have I-phones with the Internet, GPS and camera's attached with Wi-Fi, people will listen to Internet radio and you'll be able to dock the phone from your car or home or office computer. It's all contained on one piece of equipment. Nobody wants to carry more then that around. Now Wi-Fi is all over cities like Baltimore. Sprint just started a new technology that gives you a better signal. You can drive around and get a better Internet connection then you do from a cable connection in your house. For a 45 dollar a month fee your phone will be on the Internet all the time. Sirius isn't getting into cars fast enough and they're not getting them to people for free. People used to get free phones with the service. Everything is going to the Internet. Sirius is going to have to go to the Internet as well. It's going to have to change from satellite over to a server. I bet he is correct right now.

 

[out of control]

See if I can share my opinion without upsetting folks too much.........

I have been saying for probably two years this industry is not going to survive. If they had not gotten Howard I think this industry would have sank already. The whole thing is just too complicated for "Joe the plumber". Expensive equipment, getting a signal, lousy customer service, unorganized management, etc. The list goes on and on. So Howard is contracted till 2010 I think. I not sure how much longer the company will survive, but they are going to loose a lot of subs once Howard retires. If the company makes it that long. Also I never thought the merger was really going to help the situation. Now instead of two companies failing it will just be one company failing. This whole thing is just a downward spiral at this point. I hope I am wrong for the population that likes the service. This provider is OK if you can listen free, but as a paid service it is a joke.

Listen this is just my opinion. I'm not trying to spark anger in others here. Just don't take my opinion that seriously. Besides what the hell do I know ?

Internet radio "on the go" is the popular trend now. On phones mostly, but other wifi devices, etc. This is what consumers want to use at this point in time. Sat radio just can't compete with it.

 

[mch]

Bottom line, SUPPORT LOCAL BUSINESSES or you'll REALLY see your taxes go up and it's already started. Empty buildings = no commercial taxes = you pick up the slack.

Well then isn't it the same either way?

There's no commercial taxes at all here unless you're a casino. The chamber of commerce and the casinos fight over whether all the other businesses should chip in a little. Personally, I think it's fairly ridiculous that the people who live here keep raising the room tax, entertainment tax, and so on into orbit to pay for schools, roads, etc. They're the first to whine about these things but also the first to tap out-of-state money to pay for it.

 

[Jleimer]

See if I can share my opinion without upsetting folks too much.........

I have been saying for probably two years this industry is not going to survive. If they had not gotten Howard I think this industry would have sank already. The whole thing is just too complicated for "Joe the plumber". Expensive equipment, getting a signal, lousy customer service, unorganized management, etc. The list goes on and on. So Howard is contracted till 2010 I think. I not sure how much longer the company will survive, but they are going to loose a lot of subs once Howard retires. If the company makes it that long. Also I never thought the merger was really going to help the situation. Now instead of two companies failing it will just be one company failing. This whole thing is just a downward spiral at this point. I hope I am wrong for the population that likes the service. This provider is OK if you can listen free, but as a paid service it is a joke.

Listen this is just my opinion. I'm not trying to spark anger in others here. Just don't take my opinion that seriously. Besides what the hell do I know ?

Internet radio "on the go" is the popular trend now. On phones mostly, but other wifi devices, etc. This is what consumers want to use at this point in time. Sat radio just can't compete with it.

I agree with you , and I like the service , but the reality is the management is piss poor the CSR's are crap , and the Internet is kicking Satellite Radio's Ass. Now my question is would Sirius XM be better as a internet exclusive company.

 

[Schlep]

What's funny to me in all of this is that the individual companies stood a chance at surviving. They wouldn't have had to spend money on the merger, could have continued to market and improve their services, and wouldn't be locked into the $12.95 subscription rate.

Now they're stuck at $12.95 until July 2011. When they miss their guidance for Q4 due to a combination of slowing auto sales and cancellations due to the channel changes, their $210m in Feb. will be even more difficult to refinance.

 

[Jleimer]

And probably that 210 million in Feburary that they cant pay back will in all likely hood lead to either Chapter 11 or 7 bankruptcy , and Mel probably getting a seat at the NAB Table.